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Airlines

Name: AIR CHINA
7JetSet7 Code: BEJ
Status: Operational
Region: CHINA
City: BEIJING
Country: CHINA
Employees 23506
Web: airchina.com.cn
Email: zhangxna@mail.airchina.com.cn
Telephone: +86 10 8448 8888
Fax: +86 10 6146 2888
Sita: PEKURCA
Background
(definitions)

Click below for data links:
BEJ-2003-04 NEWS A319 DLVRY
BEJ-2003-09
BEJ-2003-10 NEWS-B
BEJ-2003-10 NEWS-C
BEJ-2004-01 WLDTOP25-2003
BEJ-2004-04 NEWS BUYS SHG
BEJ-2004-08 A319 GROWTH
BEJ-2005-01 2004-WORLD-RPK
BEJ-2005-01-737-700
BEJ-2005-09-737-700 WINGLETS
BEJ-2005-10 737-79L-A
BEJ-2005-10 737-79L-B
BEJ-2008-01 2007-STATS
BEJ-2008-01 DOM-MKT-SHARE
BEJ-2009-01 NEW LIVERY-A
BEJ-2009-01 NEW LIVERY-B
BEJ-2013-05 - 777 CABIN UPGRADE
BEJ-2013-07 - HOUSTON TO BEIJING
BEJ-2014-01 - BEIJING TO HAWAII
BEJ-2014-01-TOP 2013 WORLD AIRLINES-A
BEJ-2014-01-TOP 2013 WORLD AIRLINES-B
BEJ-2014-05-TO VIENNA
BEJ-2014-05-TO VIENNA-B
BEJ-2014-05-TO VIENNA-C
BEJ-2014-06-A330 TO MUNICH
BEJ-2014-07-HIGH SPEED CONNECTIVITY
BEJ-2014-09 - 1ST 747-8I-A
BEJ-2014-09 - CHENGDU TO HONGYUAN-A
BEJ-2014-09 - CHENGDU TO HONGYUAN-B
BEJ-2015--04 - TOP 25 WORLD TRAFFIC.jpg
BEJ-2015-02 - CHENGDU - COLOMBO.jpg
BEJ-2015-03 - BEIJING TO MACAU 737-800.jpg
BEJ-2015-04 - TOP REGIONAL TRAFFIC.jpg
BEJ-2015-08 - AMECO.jpg
BEJ-2015-09 - Beijing to Montreal 777-300ER.jpg
BEJ-2015-09 - Chinese President Boeing Visit.jpg
BEJ-2015-09 - TOP 10 2015.jpg
BEJ-2015-12 - To Cuba.jpg
BEJ-2016-12 - Beijings New Airport Subway Line.jpg
BEJ-BEIJING AIRPORT - 2013-11
BEJ-Cabin Att Air China Shenzhen - 2016-02.jpg
BEJ-CABIN ATTENDANTS-2014-08-A
BEJ-CABIN ATTENDANTS-2014-08-B
BEJ-CABIN ATTENDANTS-2014-08-C
BEJ-MAINTENANCE AMECO MRO - 1000TH APL - 2005-12
BEJ-MAINTENANCE AMECO-MRO
BEJ-MAINTENANCE AMECO-MRO - B 2009-12
BEJ-MAINTENANCE AMECO-MRO-A - 2009-12
BEJ-MAINTENANCE AMECO-MRO-A 2004-08
BEJ-MAINTENANCE AMECO-MRO-B 2004-08
BEJ-MAINTENANCE AMECO-MRO-C 2005-08
BEJ-MAINTENANCE AMECO-MRO-E 2005-09
BEJ-MAP-A
BEJ-MAP-B
BEJ-MAP-MAJOR AIRLINES-2003-10
BEJ-STAR ALLIANCE-2004-11-A
BEJ-STAR ALLIANCE-2004-11-B
BEJ-VISIT CHINA-A
BEJ-VISIT CHINA-AB
BEJ-VISIT CHINA-B
BEJ-VISIT CHINA-C
BEJ-VISIT CHINA-D
BEJ-VISIT CHINA-E
BEJ-VISIT CHINA-F
BEJ-VISIT CHINA-G
BEJ-VISIT CHINA-H
BEJ-VISIT CHINA-I WALL

FORMED AND STARTED OPERATIONS IN 1988. DOMESTIC & INTERNATIONAL, SCHEDULED, PASSENGER & CARGO, JET AIRPLANE SERVICES.

ADDRESS:
30 Tian Zhu Road
Tian Zhu Airport
Beijing 101312, China

China (People's Republic of China) was established in 1949, it covers an area of 9,560,980 sq km, its population is 1,265 million, its capital city is Beijing, and its official language is Chinese.

NOVEMBER 1992: 3RD YEAR OF AIRCRAFT MAINTENANCE & ENGINEERING CORPORATION (AMECO) JOINT VENTURE, AIR CHINA (BEJ) OWNS 60%, LUFTHANSA (DLH) 40% (4,000 EMPLOYEES, INCLUDINGT 40 (DLH), UNDER CONSTRUCTION (COMPLETE BY 1995), $99M, 4 BAY, (4 747 + 2 767'S).

JANUARY 1993: 1992 = +$143.3M (NET PROFIT).

1ST AMECO "D" CHECK, ON 737-200, TOOK 25,000 MANHOURS.

AUGUST 1993: 2 ORDERS (7/94) 737-300'S.

APRIL 1994: 737-300, & 767-300 (PW4056) DELIVERIES.

(FAA)/(JAA) CERTIFICATION FOR (AMECO) 747/767 "C" CHECKS.

NOVEMBER 1994: 1ST 747 "D" CHECK TOOK 78 DAYS.

JANUARY 1995: 1994 = +19% PASSENGERS (PAX), +14.1% FTK (FREIGHT TRAFFIC).

737-300 (CFM56-3B1) DELIVERY.

FEBRUARY 1995: 747-400 DELIVERY.

APRIL 1995: 737-300 & 767-300 DELIVERIES.

AUGUST 1995: 15 ORDERS ($1.9B) 777 (NOT CONFIRMED).

SEPTEMBER 1995: SOLD 2 REMAINING 707-300'S TO ROYAL JORDANIAN (RJA), FOR CONVERSION TO FREIGHTERS. PART OF 1972, 10 ORDERS 707, 1 STILL OPERATES FOR CHINA SOUTHWEST AIRLINES (XIN).

OCTOBER 1995: (AMECO) 1ST 767-200, "C" CHECK = 52 DAYS (HOPE FOR 42 DAYS NEXT TIME).

FEBRUARY 1996: 1 737-300 DELIVERY. TO TAKE 3 A340-200'S, OF THE 6 ACQUIRED BY (CASC) (OTHER 3 TO GO TO CHINA EASTERN AIRLINES (CEA). CHINA SOUTHERN AIRLINES (GUN) HAD REFUSED TO TAKE THEM, & ORDERED 777'S.

MARCH 1996: (AMECO) CONVERTED 2 CHINA UNITED (CUL) 737-200'S TO VIP.

APRIL 1996: 1ST Q = 16.7 MILLION PASSENGERS (PAX) (+15.8%), +19.6% FTK (FREIGHT TRAFFIC).

MAY 1996: 4-BAY, 747, HANGAR COMPLETED.

NEW ROUTE TO PUSAN, KOREA (737-300). CODE SHARE WITH NORTHWEST AIRLINES (NWA).

(AMECO)'S HANGAR ($70M) OPENED = LARGEST IN ASIA @ 306M WIDE, TO HANDLE SIX WIDE BODIES SIMULTANEOUSLY.

JULY 1996: (AMECO) ACCOMPLISHED 1ST STRUT MODIFICATION, WITH EXTENSIVE BOEING ASSISTANCE.

3 ORDERS (5/97) 747-400'S.

AUGUST 1996: CREATION OF NEW RELIABILITY GROUP, WHICH REPLACED THE AIRWORTHINESS DEPARTMENT (CAAC) REQUIRED), WITH LI BAO LIN, DIRECTOR RELIABILITY.

OCTOBER 1996: 2ND MAJOR "D" CHECK, STRUT MODIFICATIONS, SECTION 41 ON
747SP (RG213).

JANUARY 1997: WANG QIAN, DIRECTOR AIRCRAFT MAINENANCE, (AMECO); LIU YI LING, ADVISOR VIP AIRPLANE CONTROL & HANDLING. LI ZHONG HONG, DIRECTOR REPAIR SHOPS, & FACILITIES, (AMECO). XU ZHEN BIN, RESIGNED, TO BECOME VICE PRESIDENT OF SHANDONG AIRLINES (SHG).

(AMECO) FINALIZING ASIANA (AAR), 747 STRUCTURAL INSPECTION, STRUT MODIFICATIONS & SECTION 41 MODIFICATIONS. POSSIBLE NORTHWEST AIRLINES (NWA), 747 "D" CHECKS.

1996 = 8.596B RPK (PASSENGER TRAFFIC) (#37 HIGHEST IN WORLD) (+4.6%), +$32.1M (+$55.7M), 15,000 EMPLOYEES.

MARCH 1997: AL GORE, USA VP, PRESENT FOR SIGNING OF 5 777'S FOR $685M.

(AMECO)'S DR KARL STAHLSCHMIDT, GENERAL MANAGER, DEPARTED, & REPLACED BY ZHANG HONG YING. LI ZHONG YUAN, REPLACED MR PUETZ. WANG QIAN, DIRECTOR AIRCRAFT MAINTENANCE.

CHARTER SERVICE TO BANGKOK (747SP).

+2 ORDERS 747-400'S.

APRIL 1997: NEW SERVICE TO LONDON, VIA HONG KONG (747-400).

14,000 EMPLOYEES.

MAY 1997: NEW ROUTE, NINGBO (PORT CITY IN EASTERN CHINA ZHEJIANG PROVINCE), TO TIANJIN (MAJOR INDUSTRIAL PORT CITY IN NORTHERN CHINA) (737-300, TUES & SATS).

1 747-46JCO (PW4056) (28754) DELIVERY.

JUNE 1997: ANDREAS MEISEL, EXECUTIVE DIRECTOR, PRODUCTION SUPPORT & MARKETING; REPLACES A KLEIN, (AMECO). MR BLOCKERL, MANAGER REPAIR SHOPS (AMECO). ZHANG XIANG HE, AIRCRAFT OVERHAUL MANAGER (AMECO).

(P&W) PROVIDED MANAGEMENT TRAINING, ON BUSINESS KNOWLEDGE, & SKILLS, AS WELL AS INTERNATIONAL FINANCE, AND ACCOUNTING.

QING DAO TO SINGAPORE (767).

JULY 1997: 747-400 (RT034) DELIVERY.

AUGUST 1997: $11M CONTRACT TO (HAECO) (CAT), TO CONVERT 747-200B (23071), TO FREIGHTER, BY LATE 1997.

SEPTEMBER 1997: 747-200B (23071) TO (HAECO) FOR FREIGHTER CONVERSION, & "D" CHECK.

1 747-4J6 (28755) DELIVERY.

OCTOBER 1997: 1ST A340-313X (192) OF 3 ORDERS, TO PARIS, LONDON & ROME + OTHER EUROPEAN DESTINATIONS.

NOVEMBER 1997: (FAA) AUDIT OF (AMECO), WITH FOCUS, ON ENGINE OVERHAUL SHOP, COMPONENT REPAIR, & OVERHAUL FACILITIES.

2ND & 3RD A340 DELIVERIES.

DECEMBER 1997: (LOI) 2ND, LUFTHANSA CARGO (LUB) 747-200F (23621), "D" CHECK. 2ND 747-200, CONVERTED TO SPECIAL FREIGHTER AT (HAECO).

JANUARY 1998: PLANS TO ADD SERVICE TO JOHANNESBURG, & KUALA LUMPUR, IN NEAR FUTURE. FREIGHTER SERVICE TO ULAN BATOR, MONGOLIA.

1997 = 4.6M PASSENGERS (PAX).

5 ORDERS 737-800'S (PART OF 50 ORDERS BY (CASC) LAST OCTOBER 1997).

MARCH 1998: TIANJIN - NAGOYA (737-300). NEW ROUTE TO DALIAN & HIROSHIMA, JAPAN.

1997 = 8.22B RPM (TRAFFIC) (-4.4%).

APRIL 1998: (FAA) AUDIT OF (AMECO).

8,300 EMPLOYEES.

JUNE 1998: LI ZHONG YUAN, AIRCRAFT MAINTENANCE & OVERHAUL DIVISION, DIRECTOR (AMECO), REPLACES WANG QIAN. EDERHERD KOHL, MAINTENANCE MANAGER, (AMECO), EX-(DLH), REPLACES JORG EGGERT.

(CAAC) REQUIRES THAT 75% LF IS REACHED FOR CARRIERS, BEFORE THEY CAN ADD FREQUENCIES, ON EXISTING DOMESTIC ROUTES. ON INTERNATIONAL ROUTES, ANOTHER CHINESE CARRIER IS ONLY ALLOWED TO FLY, AFTER 100K PASSENGERS/YEAR, & 68 - 80% LF (LOAD FACTOR), WITH <4 WEEKLY FLIGHTS.

2ND 747-200, COMBI TO FREIGHTER, AT (HAECO), IN 9/98.

JULY 1998: CHARTER FLIGHT FROM GUANGZHOU TO CLARK INTERNATIONAL.

SEPTEMBER 1998: (AMECO) MAINTENANCE CONTRACT FOR "D" CHECK, SECTION 41 & STRUT MODIFICATION ON SAUDI ARABIAN (SVA) 747-100.

11TH 747-49L (SCD) (1175-28756) DELIVERY.

OCTOBER 1998: 1ST 6 MONTHS: 6.8B RPK (TRAFFIC), 570M FTK (FREIGHT TRAFFIC), 2.97M PASSENGERS (PAX).

1ST TWO 777-2J6 (168-29153; 173-29154) DELIVERIES. 747-4J6 (1181-29070), DELIVERY.

NOVEMBER 1998: 3RD 777-2J6 (179-29155) DELIVERY.

JANUARY 1999: WANG LIAN, PRESIDENT, EX-(CAAC) VICE MINISTER, REPLACES YIN WENLONG.

TO RECEIVE 1 747-400 & 2 777'S IN 1999.

FEBRUARY 1999: 2ND 747-200SF IN SERVICE AFTER CONVERSION AT (HAECO).

APRIL 1999: 8,300 EMPLOYEES. (zhanglan@airchina.com.cn).

SITA: PEKURCA.

777-2J6 (PW4090) (214-29156, B-2063), DELIVERY .

MAY 1999: 1ST Q = -$48M (REVENUE).

PAN LEI, DIRECTOR SPECIAL PROJECTS. CUI QING YUN, DEPUTY DIRECTOR ENGINEERING, REPLACES CHAI WEI XI, NOW MAINTENANCE MANAGER, (AMECO).

USA DEPARTMENT OF TRANSPORTATION (DOT) OK'S CODE SHARE WITH AMERICA WEST (AMW), TO LOS ANGELES (LAX), & SAN FRANCISCO (SFO) (NOW, 12 USA POINTS).

TENTATIVE AGREEMENT 8 ORDERS A318'S (PW6000) WITH 4 747SP'S TRADED IN.

JUNE 1999: 1998 TOP WORLD AIRLINES TRAFFIC RPM (B):
32 ASA 11.27; 33 ANZ 11.15; 34 ANS 10.14; 35 SAA 9.85; 36 SAB 9.53; 37 BEJ 9.07; 38 JAS 8.77; 39 THY 8.10; 40 EAD 8.07; 41 AIN 7.68

JULY 1999: PRELIMINARY DISCUSSIONS, OF POSSIBLE MERGER, OR PARTNERSHIP, WITH CHINA SOUTHERN AIRLINES (GUN). (GUN) INCLUDING SUBSIDIARIES FUJIAN, GUANGXI, SHANTOU, XIAMEN, & ZHUHAI, ALL COMBINED, FOR 28.6% OF (GUN)'S, 1997 REVENUE. (GUN) OPERATES TO 67 CITIES DOMESTIC.

10 YEAR ANNIVERSARY OF (AMECO)!

1998 = 9.07B RPM (+10.4%), 1.63B FTM (+23.6%).

AUGUST 1999: (BMW)/(RR) (LOI) WITH (AMECO), TO PROVIDE (BR715) (717) REPAIR & OVERHAUL.

CIVIL AVIATION ADMIN CHINA (CAAC) APPROVES THE PROPOSED MERGER OF (BEJ), WITH CHINA SOUTHERN AIRLINES (GUN). WILL BECOME ASIA/PACIFIC REGION'S, LARGEST FLEET, WITH 154 AIRPLANES, INCLUDING 46 WIDEBODIES, > QANTAS AIRWAYS (QAN) 146, & ALL NIPPON AIRWAYS (ANA) 143. (GUN) IS ACKNOWLEDGED TO BE BETTER MANAGED, AND IS EXPECTED TO LEAD THE MERGED COMPANY. IN 1998, (BEJ) LOST -$100M, & (GUN) -$66M. RUMORS OF MERGER, OF CHINA EASTERN AIRLINES (CEA), WITH CHINA NORTHERN AIRLINES (SHY), AND CHINA NORTHWEST AIRLINES (CNW), AS WELL AS CHINA SOUTHWEST AIRLINES (XIN), WITH YUNNAN AIRLINES (YUN), AND SICHUAN AIRLINES (SIC).

1ST OF 11 737-89L DELIVERIES (337-29876, B-2641) & 777-2J6 (240-29157, B-2064).

SEPTEMBER 1999: 2 737-89L'S (359-29877, B-2642; 379-29878, B-2643) AND 747-4J6 (1229-29071, B-2471) DELIVERIES. 3RD 747-SP GROUNDED. REMAINING (RG213) IN OPERATIONS TIL 10/99, WHEN IT WILL BE SOLD TO UNITED TECHNOLOGIES (UTF). 737-800 (BOEING'S 3,500TH 737!) DELIVERY.

OCTOBER 1999: AS PART OF 28 ORDERS AIRBUS AIRPLANES, ANNOUNCED BY CHINESE PREMIER, JIANG ZEMIN, IN FRANCE, AIR CHINA (BEJ) IS EXPECTED TO RECEIVE, 8/2 ORDERS A318'S (PW6000). 4 747SP'S (JT9D-7J) (21932; 21933; 21934; 22302), SOLD TO PRATT & WHITNEY (PWC). 3 A340-313'S, 2 YEAR LEASED TO CATHAY PACIFIC (CAT).

DECEMBER 1999: MARTIN HAEHNEL, MAINTENANCE MANAGER (AMECO), REPLACES EBERHARD KOHL.

1ST 10 MONTHS = 14.32B RPK, 1.33B FTK, 5.60M PAX.

SECURES $505M, LOAN TO FINANCE ACQUISITION OF 4 737-800, 1 747-400, & 1 777-200. 4 747SP'S NOW SOLD AND DELIVERED TO UNITED TECHNOLOGIES (PWC).

JANUARY 2000: RUDOLF BENK, DIRECTOR MAINTENANCE & OVERHAUL, (AMECO); REPLACES HELMUT SCHULTZ. CHINESE CONTERPART, MA KUI LIANG, REPLACES LI ZHONG YUAN.

FEBRUARY 2000: 15,000 EMPLOYEE.

(AMECO) MAINTENANCE CONTRACT, INCLUDING "D" CHECK, STRUT/SYNCHRO LOCK MODIFICATIONS + PAINT, FOR PHILIPPINE AIRLINES (PAL) 747-400.

MARCH 2000: IN 4/00, WALTER HEERDT, GENERAL MANAGER (AMECO).

(CAAC) DECIDES TO NOT MERGE AIR CHINA (BEJ) WITH CHINA SOUTHERN AIRLINES (GUN).

1999 = 15.67B RPK, 1.64B FTK, 6.64M PAX.

APRIL 2000: RESUMES SERVICE TO PUSAN, KOREA.

12,900 EMPLOYEES. (http://www.airchina.com.cn).

WANG SHENG PING, DEPUTY CHIEF ENGINEER. LI JIAN JUN, GENERAL MANAGER ENGINEERING. MA KUI LIANG GENERAL MANAGER, (AMECO), REPLACES ZHANG HONG YING, NOW PRESIDENT, CHINA NATIONAL AVIATION CORPORATION, MACAO BRANCH.

1ST Q = 3.83B RPK; 422.17M FTK; 1.73M PAX.

(AMECO) COMPLETES "D" CHECK, STRUT MODIFICATION, CABIN REFURBISHMENT, & PAINT, IN 36 DAYS, ON PHILIPPINE AIRLINES (PAL) 747-400.

737-89L (511-29880, B-2648) DELIVERY. 1 747-400 AND 1 777-200 DELIVERIES.

MAY 2000: (AMECO) COMPLETED STRUT MODIFICATION ON AIR GULF FALCON (GFG) 747-200 (20504).

747-4J6B (1243-30158, B-2472) & 777-29L (280-29744 B-2065), DELIVERIES.

JUNE 2000: (CAAC) TO BAN ALL CHINESE-MADE, YUN AIRPLANES, FROM ALL SCHEDULED PASSENGER FLIGHTS IN 6/01. 1 747-200F, ATLAS AIR (TLS) WET-LEASED. 2 737-89L (572-30159, B-2649; 594-30160, B-2650), & 1 777-2J6 (PW4077) (290-29745, B-2066) DELIVERIES.

JULY 2000: STARTS BEIJING - SHANGHAI - SYDNEY - AUCKLAND (747-400, 2/WEEK).

(AMECO) CONTRACT, FOR 2ND, 747-200 (20333) STRUT MODIFICATION, FOR AIR GULF FALCON (GFG).

1999 TOP WORLD AIRLINES TRAFFIC FTK (B):
17 NCA 2.22; 18 MTH 2.06; 19 DAL 1.98; 20 SWS 1.95; 21 LAN 1.74; 22 TII 1.67; 23 BEJ 1.64; 24 ALI 1.61; 25 EAF 1.58

1999 = +$2M: 15.67B RPK (+9.5%); 61.4% LF; 1.64B FTK (+38.2%); 6.64M PAX (+4%); 15,000 EMPLOYEES.

SEPTEMBER 2000: 1ST 6 MONTHS = 8.26B RPK (+46.8%); 885.49M FTK 3.74M PAX (+49.7%).

OCTOBER 2000: CODE SHARE WITH LUFTHANSA (DLH), BEIJING - SHANGHAI - FRANKFURT.

1ST 6 MONTHS TOP WORLD AIRLINES TRAFFIC - RPK (B):
20 ASA 9.43; 21 SAB 9.27; 22 BEJ 8.26; 23 FIN 7.35; 24 AMX 6.88.

NOVEMBER 2000: WANG KAI YUAN, AIR CHINA GROUP PRESIDENT, EX-VICE MINISTER, AT CIVIL AVIATION ADMINISTRATION OF CHINA (CAAC), REPLACES WANG LI AN.

AIR CHINA (BEJ) RECEIVES 120 MINUTES EXTENDED TWIN-ENGINE OPERATIONS (ETOPS) APPROVAL FOR 767 AND 777. WILL USE FOR OPERATIONS TO KARACHI, SYDNEY, AND MOSCOW.

DECEMBER 2000: TRANSFERS 2 737-3J6'S (2384-27045, /92 B-2585; 2385-25891, /92 B-2584), TO AIR CHINA INNER MONGOLIAN AIRLINES (IML) OPERATIONS.

JANUARY 2001: IN 3/01, TO RESUME HONG KONG - LONDON HEATHROW (LHR) (747-400).

(AMECO) HEAVY MAINTENANCE CONTRACTS, FOR CHINA SOUTHWEST AIRLINES (XIN) 737-300'S, AIR GREAT WALL (GWA) 2 737-200'S, EGYPTAIR (EGP) 737-500 (25084), TRANSAERO (TRX) 737-200 (21444), & MODIFICATIONS ON DUBAI AIR WING (DAW) 747-200 (21098), & AIR GULF FALCON (GFG) 747-200 (20333).

IN ACCORDANCE WITH (CAAC) DIRECTIVE REGARDING CONSOLIDATION OF CHINESE AIRLINES, AIR CHINA (BEJ) IS SUPPOSED TO BE MERGING WITH CHINA SOUTHWEST AIRLINES (XIN) AND CHINA NATIONAL AVIATION CORPORATION.

IN AN EFFORT TO REDUCE OPERATIONS COST, AND MEET MARKET DEMANDS, AIR CHINA (BEJ) HAS RELOCATED THEIR 747F'S, AND RELATED FLIGHT OPERATIONS PERSONNEL TO THE CITY OF TIANJIN, LOCATED APPROXIMATELY 200KM, SOUTHEAST OF BEIJING.

MARCH 2001: 1 747-200 (RD783, B-2450), CONVERTED TO FREIGHTER.

APRIL 2001: THE FUTURE OF (AMECO) IS HANGING IN THE BALANCE, WITH AIR CHINA (BEJ)'S 60%, TO LUFTHANSA (DLH)'S 40%, AND THE JOINT VENTURE, EXPIRES IN 2004. CURRENTLY, CONSIDERING LINK UP WITH SICHUAN SNECMA (SSN), TO AWARD ITS CONTRACT, FOR 44 ENGINES FOR 19 737'S. (AMECO) HAS SECTION 41 CONTRACT, FOR 2 (SAS) 747-200F'S (22150; 22151).

12,900 EMPLOYEES.

NI JILIANG, MANAGER ENGINE SERVICES, (AMECO).

EXPECTED MERGER, IS NOW AIR CHINA (BEJ) WITH CHINA SOUTWEST AIRLINES (XIN), AND ZHEJIANG (ZHE); WHILE CHINA EASTERN AIRLINES (CEA) TO MERGE WITH CHINA NORTHWEST AIRLINES (CNW) & YUNNAN AIRLINES (YUN); AND CHINA SOUTHERN AIRLINES (GUN) TO MERGE WITH CHINA NORTHERN AIRLINES (SHY) & XINJIANG AIRLINES (XIJ).

JUNE 2001: CODE SHARE WITH SHANGHAI AIRLINES (SHA), ON 22 DOMESTIC ROUTES.

1ST Q = 3.79B RPK; 352.47M FTK, 1.79M PAX.

(AMECO) HAS 3,600 MAINTENANCE TECHNICIANS (MT) EMPLOYEES. 3 HANGARS, WITH 7 WIDEBODY BAYS, & 14 BAYS, FOR NARROWBODIES. 82,000 SQ M, FACILITIES. HAS (ISO) 9002 APPROVAL. "B," "C," & "D" CHECKS, FOR 737, 747, 757, & 767'S.

2000 = 8.06M PAX, 71 AIRPLANES, 55 DOMESTIC ROUTES, AND 91 INTERNATIONAL.

2 777-2J6'S (344-29747, B-2068; 349-29748, B-2069), DELIVERIES.

JULY 2001: (AMECO) "8C+S8C" CONTRACT FOR EGYPTAIR (EGP) 767-366. ALSO, COMPLETED 1ST 767 PYLON MODIFICATION FOR AIR CHINA (BEJ).

WITH AWARD OF OLYMPIC GAMES 2008, TO CHINA, BEIJING CAPITAL INTERNATIONAL AIRPORT WILL UNDERGO A MASSIVE EXPANSION, STARTING IN 2002, INCLUDING A 3RD TERMINAL BUILDING, +2 RUNWAYS, AND AN EXPANDED, CARGO COMPLEX, AT TOTAL COST >$1B, FOR COMPLETION IN 2007. WILL HAVE CAPACITY TO HANDLE 70M PASSENGERS. IN 2000 = 21.7M PASSENGERS, AND 22.8M PASSENGERS EXPECTED IN 2001.

SEPTEMBER 2001: IN 1/02, AIR CHINA (BEJ) WILL MERGE WITH CHINA SOUTHWEST AIRLINES (XIN) & CHINA SOUTHWEST CHONGQING AIRLINES (CHO), AND CHINA NATIONAL AVIATION CORPORATION, TO BE NAMED CHINA AVIATION GROUP.

1ST 6 MONTHS = -$71.45M.

2 747-4J6'S (25879; 25880), TRADED INTO BOEING, FOR 7 ORDERS (2/03) 737-700'S. 4 767-200'S (JT9D), RECEIVES 120 MINUTES (ETOPS) APPROVAL.

OCTOBER 2001: PLANS TO CREATE SEPARATE CARGO OPERATIONS, WITH 1,400 EMPLOYEES, AND FLEET OF 4 747-200SF'S. NUMBER OF CARGO AIRPLANES IN FLEET EXPECTED TO REACH 10 IN 10 YEARS.

1ST Q = -$75.06M. 2ND Q = +$1.21M. 3RD Q = +$54.24M.

6 ORDERS 737-700. 2 A340-313X'S (199; 201, B-2387) RETURNED FROM CATHAY PACIFIC (CAT).

NOVEMBER 2001: (AMECO) COMPLETES ITS 1ST, "C3" MAINTENANCE CHECK, ON A LAUDA AIR (LAL) 777-200.

DECEMBER 2001: FU BAO XIN, VP ENGINEERING & MAINTENANCE, RETIRES.

TO TAIYUAN (737-300, DAILY). TO SANYA, A RESORT TOWN ON HAINAN ISLAND.

CELEBRATES 47 YEARS OF SAFE OPERATIONS.

JANUARY 2002: IN 4/02, TO LONDON (LHR) NONSTOP.

2001 TOP 50 WORLD AIRLINES - TRAFFIC B RPM:
1 UAL 116.60; 2 AAL 106.15; 3 DAL 97.60; 4 NWA 73.11; 5 BAB 64.24; 6 AFA 59.54; 7 CAL 58.76; 8 DLH 56.76; 9 JAL 50.77; 10 USA 45.93; 11 SWA 44.50; 12 SIA 42.76; 13 QAN 42.14; 14 ACN 41.49; 15 KLM 35.76; 16 ANA 33.16; 17 CAT 27.81; 18 TII 27.43; 19 IBE 25.64; 20 KAL 23.73; 21 ALI 22.45; 22 MAS 22.29; 23 AMW 19.06; 24 VAA 17.65; 25 VAR 16.02; 26 CHI 16.00; 27 EAD 14.37; 28 SAS 14.26; 29 ANZ 13.54; 30 SAA 12.70; 31 SVA 12.56; 32 BEJ 12.39; 33 ASA 12.23; 34 JAS 10.06; 35 THY 9.35; 36 AMX 8.51; 37 PAL 8.36; 38 GIA 8.15; 39 CMA 7.99; 40 ELA 7.79; 41 GUL 7.65; 42 PIA 7.24; 43 AIN 7.10; 44 TAP 6.43; 45 EGP 5.53; 46 OLY 5.24; 47 AUL 5.06; 48 FIN 4.93; 49 IND 4.52; 50 CQT 4.51.

737-89L (1055-30514, B-2670) DELIVERY.

FEBRUARY 2002: GOVERNMENT FINALLY OK'S CONSOLIDATION OF CHINA'S AVIATION, WITH MERGER OF 9 (CAAC) CONTROLLED, OPERATORS, INTO 3 GROUPS: CHINA SOUTHERN AIRLINES (GUN), AIR CHINA (BEJ), AND CHINA EASTERN AIRLINES (CEA), WHO HAVE 80% OF DOMESTIC MARKET: (GUN), TO INCLUDING CHINA NORTHERN AIRLINES (SHY) & XINJIANG AIRLINES (XIJ), WITH LARGEST FLEET OF 180 AIRPLANES, #50.1B YUAN ($6.05B) ASSETS, & >34,000 EMPLOYEES; (BEJ), TO INCLUDE CHINA SOUTHWEST AIRLINES (XIN) & CHINA NATIONAL FOR FLEET 118 AIRPLANES, #56.05B YUAN, & >20,300 EMPLOYEES; & (CEA), TO INCLUDE CHINA NORTHWEST AIRLINES (CNW) & YUNNAN AIRLINES (YUN), FOR FLEET OF 118 AIRPLANES, #47.3B ASSETS, & >25,000 EMPLOYEES.

(BEJ) STATES, THAT IN PREPARING FOR A LISTING, ON THE HONG KONG, AND NEW YORK STOCK MARKETS, IT IS LOOKING FOR A STRATEGIC PARTNER, TO BE OFFERED A STAKE, IN (BEJ)'S PRIVATIZATION.

FOLLOWING CORPORATE RESTRUCTURING LAST YEAR, (BEJ) REDUCED ITS 11,500 WORKFORCE BY -230.

2001 = +$6.4M: 19.63B RPK; 1.55B FTK; 9.28M PAX (+11.5%).

MARCH 2002: (TELEPHONE: (10) 64 56 32 30). (FAX: (10) 64 56 38 31).

APRIL 2002: 11,342 EMPLOYEES.

(TELEPHONE: +86 10 6459 9068). (FAX: +86 10 6459 9064).

TO LANZHOU (ZHONGCHUAN) (737-600).

ACCDT: 767-200 CRASHES ON APPROACH TO PUSAN, SOUTH KOREA, IN FOG AND BAD WEATHER = 128 FATALITIES OF 11/155.

June 2002: 1 737-89L (30515) delivery.

July 2002: In 9/02, to New York (JFK) (nonstop, 3/week).

August 2002: Former Air China (BEJ) finance executive, Yang Ning, who embezzled >$3.1M from (BEJ), is executed in Beijing.

1st Chinese airline to fly nonstop to New York, using polar route (747-400, 3/week). Cuts flying time, from 17 hours, to 13 hours.

Applies to (CAAC) to start China's 3rd all-freight airline by end of 2002. The as-yet unnamed carrier, is to begin operations with (BEJ)'s existing 747-200F's and acquire 2 additional airplanes next year. A booming domestic freight market and opportunities abroad, prompted (BEJ) to challenge the existing all-freight carriers, China Cargo Airlines (60% owned by Shanghai-based China Eastern Airlines (CEA)), and China Postal Airlines (49% owned by (GUN)). (BEJ) will own 60% of the new carrier, with the rest of the stock split between Beijing Capital International Airport, and Citic Pacific, the Hong Kong representative of China's largest foreign investment firm.

Switches order for 8 A318's (PW6000), to 6 A319-100's (V2500) (6/03). Plans to transfer its 4 747-200F's to a new subsidiary, cargo airline, to be jointly held with CITIC Pacific, Hong Kong.

October 2002: Air China (BEJ) Cargo to Portland, Oregon (2/week).

To Urumqi (767, 3/week).

1st 6 months Top World Airlines Traffic (B RPK):
1 AAL 95.18; 2 UAL 84.56; 3 DAL 74.53; 4 NWA 56.50; 5 BAB 49.30; 6 AFA 48.21; 7 CAL 47.49; 8 DLH 42.06; 9 JAL 39.44; 10 SWA 36.03; 11 SIA 36.00; 12 ACN 33.69; 13 USA 33.06; 14 KLM 27.54; 15 CAT 23.07; 16 IBE 19.53; 17 KAL 16.47; 18 CHI 15.70; 19 AMW 15.20; 20 ALI 14.21; 21 EAD 13.45; 22 VAR 12.68; 23 GUN 12.49; 24 SAS 12.01; 25 BEJ 10.32.

(CAAC) announces the formation of 6 aviation groups: Air China Group (China National Aviation Holding Company); China Eastern Airlines; China Southern Airlines; China Aviation Oil Group; China Aviation Information Group; and China Aviation Equipment Group. These groups will operate independently. The (CAAC) no longer owns the state-owned assets of these groups, and will not take responsibility for their operating losses. The (CAAC) cuts its economic ties with these companies, and retreats to functioning only as an industry regulator. The assets of the 3 consolidated airline groups, comprise 80% of the industry's total assets. Their strength and ability to compete internationally, has been significantly enhanced through this restructuring.

Wang Kai Yuan, CEO, China National Aviation Holding Co (new Air China group).

Currently, (BEJ) operates >3,000 flights/week. The new Air China will operate on 307 domestic and international routes with services to 28 cities.

737-89L (1224-30517, B-2657) delivery. 2 orders (4/03) 767-3Q8ER's (PW4060) (28132; 30301), ex-(TWA)/(AAL), (ILF) 5 year leased.

November 2002: (AMECO) is to pool resources with strategic partners Lufthansa Technik (LTK) (DLH) and Hawker Pacific, for landing gear maintenance and overhaul in China.

In 12/02, to Phuket (2/week) with CTI Travel Group.

11th 737-800 delivery. +4 orders 737-800.

December 2002: Projects 2002 = +# 600M Yuan/+$72.5M.

March 2003: Long term, heavy maintenance contract to (AMECO) (BEJ) to perform 8 "S4C"/"S8C" checks and strut modifications on Asiana Airline's (AAR) 767-300ER fleet. 2-year maintenance contract to (AMECO) (BEJ), for "C" checks, strut modifications and painting for 8 (CDF) Thomas Cook "powered by Condor" 767-300ER's. (AMECO) completed cockpit door modifications on 1st of 12 Air China (BEJ) 747's to meet (FAA) safety requirements for flights to & from US. Air Atlanta Icelandic (AID), 5-year heavy maintenance contract, and technical services to (AMECO) Beijing (BEJ), for 747 heavy checks.

Joint venture with Beijing Capital Airport and Citic Pacific of Hong Kong (who also own stakes in Cathay Pacific (CAT) & Dragonair (DRG), to create Air China Cargo, who initially will operate 4 747-400F's, with plans to buy +2 747-400F's and 3 Tu-204 freighters within 2 years. Zhang Zueren, President, Air China Cargo, said the 3 TU-204-120C's (RB211) were ordered by the Chinese government 2 years ago for China Southwest Airlines (XIN), the airline that (BEJ) acquired last year. Projects revenues of # 4.1M yuen/$495M in 2003 and hopes to become one of the top 10 cargo carriers by 2010.

757-2ZO (669-27511, B-2844), transferred from China Southwest Airlines (XIN). 2 757-330's (846-29013, D-ABOF; 855-30030, D-ABOH), wet-leased to Transavia (TAV). 2 767-3Z9's (731-29867; 759-30331), ex-Lauda Air (LAL).

April 2003: 11,515 employees. (zhuyongs@airchina.com.cn).

(Telephone: +86 (10) 84 56 32 20). (FAX: +86 (10) 64 56 38 31).

June 2003: 1st 737-79L (33408) delivery. 767-3Q8ER (762-30301, B-2494), ex-(TWA), (ILF) leased.

July 2003: Resumes Chongqing - Seoul (2/week).

2002 TOP 25 WORLD FREIGHT CARRIERS - B - FTK
1 (FED) 13.20; 2 (LUB) 7.16; 3 (UPS) 6.62; 4 (KAL) 6.25; 5 (SIA) 6.08; 6 (AFA) 4.87; 7 (CAT) 4.85; 8 (CHI) 4.60; 9 (JAL) 4.39; 10 (CLX) 4.16; 11 (BAB) 4.12; 12 (KLM) 3.99; 13 (EVA) 3.28; 14 (NWA) 3.24; 15 (AAL) 2.93; 16 (UAL) 2.79; 17 (AAR) 2.75; 18 (NCA) 2.21; 19 (POA) 1.97; 20 (EAD) 1.96; 21 (MAS) 1.92; 22 (BEJ) 1.88; 23 (TII) 1.824; 24 (DAL) 1.823; 25 (ACN) 1.58.

2 737-79L's (1351-33409, B-5044; 1354-33410, B-5045) deliveries. 1st A319-132 (2000, B-6022) delivery, to be wet-leased to Air China Zhejiang (ZHE).

August 2003: Has completed its merger with China Southwest Airlines (XIN) and Zhejiang Airlines (ZHE).

Code share with United Airlines (UAL) TO +5 Chinese cities, while Air China (BEJ) will add +14 American cities.

1 767-3Q8ER (PW4060) (692-28132), ex-(TWA). 2 A319-132's (2007, B-6023; 2015, B-6024), delivery to (ZHE).

September 2003: Beijing - Kuala Lumpur (3/week). Beijing - Jiuzhaigou (Sichuan). Shanghai - Milan (MXP) (2/week).

2002 = 24.00B RPK (+17.6%); +10.4% ASK; 68.3% LF (+1.5); 10.6M PAX (+14%); 1.9B FTK (+16.9%).

2002 TOP WORLD AIRLINES TRAFFIC RPK (B):
20 (IBE) 40.47; 21 (MAS) 37.65; 22 (AMW) 32.00; 23 (EAD) 31.66; 24 (ALI) 30.03; 25 (GUN) 28.94; 26 (VAA) 27.00; 27 (CHI) 26.81; 28 (VAR) 26.12; 29 (BEJ) 24.00; 30 (SAS) 23.21.

747-400F, Singapore Airlines (SIA) Cargo 3 year leased. +4 orders (6/05) A319's (V2500-A5).

November 2003: $2.4B, 30 orders 737's (CFM56) to be distributed to: Air China (BEJ) (5 737-700's), Xiamen Airlines (XIA) (5 737-700's), Hainan Airlines (HNA) (8 737-800's), Shandong Airlines (SHG) (7: 3 737-700's & 4 737-800's), and Shenzhen Airlines (SHZ) (5 737-900's).

December 2003: Service to Johannesburg in 2004.

Formed Air China Cargo Airlines (CAO) with registered capital of # RMB 2.2B/$266.3M and total investment capital of # RMB 3.5B/$423.7M with shareholdings held by Air China (BEJ) (51%), CITIC (25%), & Beijing Capital International Airport Group (24%). Has its own 5 747F's and manages the belly cargo of Air China (BEJ) airplanes.

January 2004: 2003 = +# 93M yuan/+$11.3M: 33.46B RPK (+2.6%); 66% LF; 18.03M PAX (+6.6%); 2.18B FTK (+6.5%); 564,000 tons of freight.

Beijing - Xiamen - Jakarta (2/week). Chongqing - Shanghai - Nahoya (3/week). Hangzhou - Singapore (3/week).

2 737-36E's (CFM56-3C1) (26315, /95; 26317, /95), ex-Aeris (AEY), (ILF) leased.

February 2004: Code share with Dragonair (DRG), Hong Kong - Chengdu, Chongqing, Dalian, and Tianjin - Hong Kong.

March 2004: Code share with All Nippon Airways (ANA), including marketing & operations agreement, plus frequent flyer miles accrual, Tokyo Narita & Osaka Kansai to Beijing & Shanghai, including (ANA)'s 56 weekly flights, Air China (BEJ)'s 39 weekly flights, and Hangzhou - Tokyo Osaka. Hangzhou - Singapore. Shenyang - Beijing - Frankfurt (daily). Shenyang - Beijing - Los Angeles (4/week). Shenyang - Beijing - Sydney (2/week).

Bought 20% stake in Shandong Airlines (SHG) and also a 26% stake in its parent company Shandong Aviation Group who own 64% of (SHG).

(BEJ) will be listed in overseas stock markets.

April 2004: 3 737-36E's (26315; 26316, B-2627; 26317, B-2603) & (ILF) leased. 2 A319-132's (2202, B-6032; 2205, B-6033) deliveries.

May 2004: 1 order (2004-07) 737-3Q8 (26333), ex-TACV (TCV), (ILF) leased.

June 2004: USA and China have signed a landmark air services agreement that will more than double the number of USA airlines that may serve China and will permit a nearly 5-fold increase in weekly flights between the 2 countries over the next 6 years.

The agreement allows for +5 airlines from each country, the USA may name +1 additional all-cargo carrier, while China may name either a passenger or cargo carrier, to start service later in 2004. The other 4 new-entrant airlines may be either passenger or cargo carriers, with 1 new carrier entering the market in each of the years 2005, 2006, 2008, & 2010. United Airlines (UAL), Northwest Airlines (NWA), FedEx (FED), & United Parcel Services (UPS) currently serve China.

The agreement allows +195 weekly flights for each side, +111 by all-cargo carriers, & +84 by passenger airlines, resulting in a total of +249 weekly flights at the end of a 6-year phase-in period. A total of +14 of these flights will be available for new passenger services later this 2004.

Each country's carriers are now allowed to serve any city in the other country. Currently, Chinese carriers are limited to 12 USA cities, and USA passenger carriers may fly to only 5 Chinese cities. The agreement allows unlimited code-sharing between USA and Chinese carriers, thus expanding the current agreement which only allows code-sharing only to a limited number of cities.

The agreement also provides that when carriers establish cargo hubs in the other country, they will be afforded a high degree of operating flexibility, and expands charter opportunities beyond those provided by the existing agreement.

Trade between the countries has grown dramatically fromn $4.8B in 1980 to >$170B in 2003. The USA is China's largest export destination, and China is the USA's fastest-growing market.

767-33AER (27909), AWAS (AWW) leased.

July 2004: Selects Sabre Airline Solutions to conduct "a gap analysis between Air China Airlines (BEJ)'s current airline planning & scheduling, pricing and data warehousing practice and industry best practices."

Air China (BEJ) Cargo $400M, 2 orders (11/05) 747-400F's (PW4056), 1 Singapore Airlines (SIA) leased.

737-3Q8 (26333, B-2604), (ILF) leased. 737-36Q (29326, B-2630), Boullioun (BOU) leased. 2 737-79L's (33411, B-2612; 33412, B-2613) deliveries. A319-115 (2237, B-6034) delivery.

August 2004: Lufthansa (DLH) Group and Air China (BEJ) will invest $100M in their jointly owned Aircraft Maintenance & Engineering COmpany (AMECO), Beijing over the next 4 years as part of their agreement to extend their cooperation for +25 years. Air China (BEJ) will continue to hold 60% of the venture. The new capital will be used to finance hangars, warehouses, plus components & engine shops.

Beijing - Munich (767-300, 3/week).

Will form a subsidiary, Tibetan Airlines, with 5 A319's complementing (BEJ)'s 2 757-200's which are based at Lhasa.

737-79L (33413, B-2700) delivered. 767-33AER (27477, B-2497), AWAS (AWW) leased. Plans to operate 13 routes with 700,000 passenger/year. A319-115 (2269, B-6035) delivery.

September 2004: Li Jiaxiang, President, has been named General Manager of the China National Aviation Group.

Beijing - Dubai (767-300, 3/week).

7 orders (2005-11) 737-700's. 3 A319-115's (2285, B-6036; 2293, B-6037; 2298, B-6038) deliveries.

October 2004: Air Atlanta Icelandic (AID) contract with (AMECO) Beijing (BEJ) for another 12 747 heavy maintenance checks to be conducted in 2005.

Cathay Pacific Airways (CAT) and Air China (BEJ) entered into an (MOU) stating (CAT)'s intention to acquire a 9.9% shareholding in (BEJ) at the time of the latter's Initial Public Offering (IPO). The (MOU) also deals with future cooperation between them, including joint marketing & sales activities to promote traffic between city pairs in their respective markets, coordinating of operating schedules to enable the maximum feeding of passengers and cargo between them and cooperation in engineering, ground handling, catering, cargo services, info technology, purchasing, safety, and security.

+6 orders A319's (CFM56-5).

November 2004: Selects Rockwell Collins to provide avionics on 5 orders 737NG's for delivery in 2005.

Won control of Shandong Airlines (SHG) after buying a 22.8% stake for $20M from parent Shandong Aviation Group, who owned 64.8% of (SHG).

Plans to go public in 2004-12 by selling 2.8 Billion shares in an (IPO). Hopes to receive $1 Billion for the sale of about 30% of its stock.

1 +1 order 737-7BX (30736, B-5063; 30737, B-5064), ex-Astraeus (AUA).

December 2004: Following annual visit of German Chancellor Gerhard Schroeder, Air China (BEJ) announced $1.3 Billion 23 orders A319/A320's.

(BEJ) raised $1.06 Billion in the launch of its Initial Public Offering (IPO) in a market that was buoyed by oil prices retreating from record highs and the bullish rise of air travel in China. The (IPO) was for 2.8 Billion shares representing 31% of the airline at HK$2.98/$0.38 each. Cathay Pacific (CAT) bought 905 Million shares or 32.3% of the offering for HK$2.69B (10% OF (BEJ)'s equity) - the two plan to cooperate in several areas. Air China (BEJ) who recently took over China Southwest Airlines (XIN), & Zhejiang Airlines (ZHE) under the country's consolodation policy, has a 35% share of China's 20 busiest routes and 51.3% of its international market.

January 2005: (CAAC) (CAC), $7.2 Billion, 60 orders (2008-02) 787-8's, 223 PAX: 13 787-8's to China Southern Airlines (GUN), including 3 787's for Xiamen Airlines (XIA); 15 787-8's to China Eastern Airlines (CEA); 8 787-8's to Hainan Airlines (HNA); 20 787-8's to go to Air China (BEJ); and 4 787-8's Shanghai Airlines (SHA). 20 orders A330-200's.

2 737-36Q's (28664; 28761), Shandong Airlines (SHG) wet-leased for Taiwan flights to Kaohsiung.

March 2005: Selects Sabre Airline Solutions' AirFlite suite for implementation. Will employ consulting services from Sabre to assist with product implementation and network planning.

Starts construction of 4-bay maintenance hangar & new docking system for wide-body airplanes at Beijing Capital International Airport, costing 10 Million yuan/$1.2 Million, to be completed by 2005-06.

737-36M (28333, B-2504), (GEF) leased.

April 2005: 2004 = +2.39 Billion yuan/+$288.8 Million (+160 Million yuan): from restructuring the company, streamlining the organizational structure, and successfully listing its shares in Hong Kong and London: 46.64 Billion (RPK) traffic (+39%) (International 19.6 Billion (RPK) (+53.8%); +27.9% (ASK) (International +41.5% (ASK)); 70% LF; 24.5 Million passengers (PAX) (+35.7%).

May 2005: 23,000 employees (including 2,600 flight crews (FC); & Cabin Attendants (CA)).

11 shipset orders of Aviation Partners Boeing (APB) blended-winglets for its 737-700's starting in 2005-08.

Cathay Pacific (CAT) Memo of Understanding (MOU) for promoting sales & marketing initiatives with Air China (BEJ), including new codesharing. In 4th Quarter, (BEJ) code share on two (CAT) flights Beijing to Hong Kong (one daily and the other 3/week). In turn, (CAT) will codeshare on three of (BEJ)'s to and from Beijing. The codeshare will include reciprocal frequent-flier benefits.

2 orders (2006-06) 737-800's (30704; 30705, (ILF) leased.

June 2005: 2 737-36N's (28554, B-2600; 28558, B-2614), GECAS (GEF) leased. 2 A319-115's (2499, B-2364; 2508, B-6004), delivery.

July 2005: 737-79L (34019, B-5211), delivery. $3.9 Billion 20 orders (2006-05) A330-200's. A319-115 (2525, B-6014), delivery.

August 2005: 2 737-79L's (34020, B-5213; 34021, B-52143) & 3 A319-115's (2532, B-6044; 2545, B-6046; 2551, B-6047), deliveries.

September 2005: Dragonair (DRG) will provide two airplanes to its mainland affiliate Air China (BEJ) via wet-lease. The deal covers one A330 and one A320 for two years. Dragonair (DRG) and Air China (BEJ) are linked through equity and codeshare on seven routes.

United Airlines (UAL) awarded a five-year contract covering all of its 777 heavy airframe maintenance to (Ameco) (BEJ) Beijing, the 60/40 joint venture between Air China (BEJ) and Lufthansa (DLH). Value of the deal was not supplied. More than 50 heavy maintenance visits are planned for the first three years, with as many as 80 over the contractual period. Work begins in 10/05 with five airplanes nose-to-tail, (AMECO) said. (UAL)'s 777 fleet numbers 53 airplanes of which 52 are in service.

As part of the transaction, (AMECO) will create an Information Technology (IT) interface with United Airlines (UAL) for "e-documents, human resources data, invoicing processes and other real-time data services." (AMECO) had revenue of RMB1.6 billion/$197.6 million in 2004.

Air China (BEJ) reported a -25% fall in its first-half net profit to 591.3 million yuan/$72.5 million owing to fuel prices. Revenue also was down at 16.94 billion yuan.

Lufthansa (DLH) Systems said Air China Cargo (BEJ) implemented its Weight & Balance System for pre-flight planning, load planning and optimization.

Air China (BEJ) said it will launch flights to seven cities in Europe and North America from Xi'an, the capital of the Shaanxi province in the north-west of the country. The flights will operate to London, Frankfurt, Paris, New York, San Ffransisco, Los Angeles and Vancouver.

737-79L (34022, B-5217), Pegasus (PSS) leased, & A319-115 (2559, B-6048), deliveries.

October 2005: Air China (BEJ) joined the Asia Miles program, bringing the number of airline partners to 18.

Air China (BEJ) launched five new routes linking inland regions to Europe and the USA. Flights are now operating from the coastal city of Qingdao to Frankfurt, Paris and Los Angeles via Beijing. New services are also on tap from Chengdu to New York and San Francisco.

Boeing said it will supply its Enterprise One software to China Airlines (BEJ), which will use selected modules to standardize management of airplane configurations and maintenance requirements across its entire fleet.

Air China (BEJ) reported robust growth figures for September, with passenger numbers up +11% to 2.5 million and cargo up +5.5% to 67,000 tonnes. Passenger load factor climbed 1.4% to 78.5% LF.

FL Group (ICE) and Kaupthing Bank signed a letter of intent to form a company to manage 10/5 737-800s ordered by FL Group (ICE) earlier this year. FL Group (ICE) will hold 49% of the leasing venture. Lease agreements have been placed for nine of the airplanes, five of which will go to Air China (BEJ) as previously announced.

Cathay Pacific (CAT) and Air China (BEJ) will codeshare between Beijing and Hong Kong from October 30. (CAT) will operate 10X weekly to Beijing and (BEJ) will operate 3X daily roundtrips.

737-79L (34023, B-5201 with special 2008 Olympics colors, "One World, One Dream"), delivery.

November 2005: Two issues must be resolved before China can experience explosive growth in online travel, and neither is insurmountable, according to participants at TravelSky Technology Ltd's China Travel Distribution Future Forum 2005 in Beijing. The first is widespread implementation of electronic ticketing in what is expected to become the world's largest travel market.

The second issue may prove more challenging: facilitating online payment for online purchases in a country in which credit cards are relatively scarce.

Participants at the forum, who addressed a standing-room-only audience of travel agents, technology providers and other industry players, agreed that e-ticketing eventually will take hold, but for now it faces obstacles that are familiar to observers of its development in the West.

In China, "there is no interlining in e-ticketing," said Sun Ji, manager of China Air Service Ltd, a large travel agency. "Changing a ticket is difficult." But he noted that 80% of e-ticket users who do not have to make changes express a high degree of satisfaction with the process.

Several international carriers have introduced e-ticketing, and Zhang Lan, director of Air China's commercial committee, said it will become China's first interline e-ticketing provider when it implements an agreement with United Airlines (UAL) next month.

But the industry needs to put more money into technology so that e-ticketing can move forward, she said.

The issue of payment is more complex. Justin Xiong, founder and general manager of Yoee.com, noted that China has "a highly developed debit card system." But there are no wide network systems of debit cards, such as Visa or Mastercard; each bank issues its own, and connecting with all them is daunting for online sellers of travel.

In addition, many banks place spending limits on single purchases and/or daily spending via debit card in order to combat fraud, and often those ceilings are too low, in some cases, about $125 for the purchase of an international airline ticket.

As a result, many online transactions are completed in convenience stores.

China signed a deal for 70 Boeing 737-700/800s for delivery between 2006 and 2008. The airplanes are destined for: Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA), Shanghai Airlines (SHA), Xiamen Airlines (XIA), Shandong Airlines (SHG), Hainan Airlines (HNA) & Shenzhen Airlines (SHZ).

A319-115 (2614, B-6213), delivery.

December 2005: China and Singapore agreed to an expanded air services deal lifting restrictions on routes, capacity and airplane type on flights between the countries. The contract was signed in Beijing, according to media reports.

Airbus's negotiations with Chinese authorities resulted in a blockbuster contract as the airframer reached a "general terms agreement" with Chinese Aviation Supplies Import and Export Group for the purchase of 150 A320 family airplanes.

The order comprises A319s, A320s and A321s – the largest single order Airbus has ever received since it entered the Chinese market 20 years ago.

The deal is worth nearly $10 billion and was signed in the presence of Prime Minister Dominique de Villepin and Premier Wen Jiabao during the latter's visit to France.

"Since it was first introduced into the Chinese market in 1995, the A320 family airplanes have been put in service by 10 Chinese operators with a total of 216 airplanes, accounting for two-thirds of all in-service Airbus airplanes, or nearly one-quarter of the total airplanes in operation in China,” said (CSC) President Li Hai. “The demand for this modern and cost-saving airplane family from Chinese airlines has been rapidly increasing in recent years."

The 150 airplanes will be delivered to six Chinese airlines, including Air China (BEJ), China Eastern Airlines (CEA), China Southern Airlines (GUN), Sichuan Airlines (SIC), Shenzhen Airlines (SHZ), and Hainan Airlines (HNA).

The agreement followed by one day the signing of a Memo of Understanding (MOU) between Airbus and the National Development & Reform Commission of China covering Chinese participation in Airbus programs including the possibility of establishing a final assembly line "for single-aisle airplanes in China."

Five Chinese companies currently produce parts for Airbus, which has committed to increase procurement volume to $60 million by 2007 and $120 million by 2010. It employs 54 Chinese engineers, soon to be 200, at its Beijing engineering center, which will be part of China's promised participation in the A350 program. Airbus and China Aviation Industry Corporation signed a $500 million extension last month to a contract for A320 family wing boxes.

737-79l (34537, B5202), delivery. ILFC (ILF) announced the lease of 3 737-8Q8's (29373; 29374; 30716) to Air China (BEJ) for 7 years. The new airplanes are due for delivery in Jan, Feb and Mar 2007. Air China (BEJ) Cargo (CAO) took delivery of the first of two new 747-4FTFs (34239, B-2475). It is powered by Pratt & Whitney (PW4056)s. A319-115 (2643, B-6216), delivery.

January 2006: SITA was contracted by Beijing Capital International Airport (BCIA) to equip the new Terminal 3 with its passenger check-in platform. T3 will more than double the airport's passenger capacity from 27 million to 68 million in time for the 2008 Olympic Games.

The $10.8 million contract covers installation of SITA's common-use check-in platform AirportConnect (CUTE) and will support up to 500 (CUTE) workstations at (BCIA)'s T3A and T3B terminal buildings. In addition, SITA will install and maintain BagMessage and AirportConnect Platform Services. The agreement follows a $5 million, three-year deal signed last year whereby SITA was contracted to continue managing the (CUTE) check-in system for the 26 million passengers that pass through (BCIA)'s Terminal 2 each year.

Chinese airlines reported robust growth in passengers and cargo for 2005 thanks to surging traffic, and in the case of China Eastern (CEA) and China Southern (GUN) the gains from mergers completed last year. Air China (BEJ) reported a +13% increase in passengers to 27.7 million while cargo jumped +10.2% to 732,818 tonnes. China Eastern (CEA) saw a +37% leap in passengers to 24.3 million and a +14% rise in cargo to 755,010 tonnes. China Southern (GUN) also had impressive numbers as passenger totals jumped +56.4% to 44.10 million and cargo climbed +42.1% to 774,550 tonnes. In Hong Kong, Cathay Pacific (CAT) reported +13% annual growth in passengers to 15.4 million while cargo rose +15% to a record 1.1 million tonnes. Dragonair (DRG) handled 5 million passengers, up +9.9%, and 385,000 tonnes of cargo, a rise of +12.5%.

China will begin work this month on a train link between Beijing's airport and the city centre - - the first private train construction venture in the country. The 16.9-mile train line is scheduled to be ready in time for the 2008 Olympic Games. It will cost an estimated CNY5.4 billion/$669.5 million.

Air China (BEJ) has opened five services from Xi'an in Shaanxi province to Frankfurt, Paris, London, New York and San Francisco. The services include a Beijing stop.

2 737-79L's (34538, B-5203; 34539, B-5220), deliveries.

February 2006: Connexion by Boeing and Air China (BEJ) reached a "preliminary agreement" to provide Connexion's high-speed connectivity solution to Air China (BEJ) passengers traveling to and from China. The agreement covers up to 15 firm and optional retrofit installations of the product on 747-400s and other long-haul models. Financial terms were not disclosed. Installations are planned to begin in October.

Chinese domestic airlines flew a record 138 million passengers in 2005, a rise of +15% over 2004 and double the number of 2000. The figure is expected to double again in the next five years, according to Gao Geng, the vice minister of the General Administration of Civil Aviation in China. Cargo and airmail throughput rose +14% to 3.04 million tons in 2005 and also is expected to double in the next five years. However, profit margins will remain tight within the sector. He noted revenues in the sector had grown to CNY170 billion/$21.09 billion at the end of 2005, but profits in the past five years had amounted to only CNY10 billion.

Air China (BEJ)'s order for 10 737s has been confirmed as 737-800 series airplanes with delivery expected from the end of 2007 through the end of 2008.

737-79L (34540, B-5226), delivery.

March 2006: A second international airport may be needed for Beijing in the next five years to meet the soaring demand for air travel in the country. News of an additional airport comes as the city's main facility, Beijing Capital International Airport, which handled 41 million passengers in 2005, is in the midst of a $3 billion improvement program to build a new terminal and third runway in advance of the 2008 Olympic Games. The project will boost the airport's capacity to 70 million passengers when completed in 2007.
More capacity will likely be needed downstream of the Olympics however. Beijing News quoted vice head of the civil aviation regulator, Wang Changshun, as saying a second airport is likely to be built within the next five years. According to Reuters, a location has not yet been selected.

Unisys Corporation said Air China (BEJ) chose the Unisys Logistics Management System to manage its air cargo operations. Under a five-year agreement, Unisys also will be providing hosting and integration services and working closely with Air China (BEJ) on customization of services for the Chinese domestic marketplace as well as the implementation and cutover expected in March 2007.

Air China (BEJ) announced it plans to begin service from Beijing to Mumbai and New Delhi from October. The airline would operate 4 flights to each of the destinations using a 767.

737-808 (34701, B-5161), Icelandair (ICE) wet-leased.

April 2006: A joint statement released by Cathay Pacific Airways (CAT) and Air China (BEJ) and investors Swire Pacific, China National Aviation Co and CITIC Pacific confirmed reports that "discussions are taking place about operational cooperation" between (CAT) and Air China (BEJ) and "realignment of shareholdings" in the two airlines and Dragonair (DRG), the Hong Kong carrier owned jointly by CNAC (43.3%), CITIC (28.5%), Cathay (CAT) (17.8%) and Swire (7.7%). There has been talk of Cathay (CAT)'s increasing its stake in Dragonair (DRG) as it looks to build a stronger presence on the mainland, while Air China (BEJ), in which (CAT) owns 9.9%, leans toward joining the Star Alliance.

"There is no agreement or arrangement which is discloseable under the Listing Rules," the statement said, adding that Swire intends to remain the principal shareholder in Cathay (CAT) (46.8%), CNAC will retain controlling interest in Air China (BEJ) (69%; it also owns 43.3% of Dragonair (DRG), CITIC "may reduce" its 25.7% share in (CAT) but plans to remain a "significant shareholder," and Air China (BEJ) has "no current intention" to privatize CNAC.

Negotiations between Air China (BEJ) and Cathay (CAT) center on enhancing "cooperation between them in various business and operational areas," the statement said, while Dragonair (DRG) will continue to "remain a principal airline" in Hong Kong and the Chinese mainland.

(IATA) and the Chinese government agreed to open an additional route, Y-1, between China and Europe, designed to reduce flight time by 30 minutes. The route is expected to open to commercial traffic and initially could benefit up to 110 weekly flights, saving airlines $30 million in fuel costs, according to (IATA) Director General and CEO, Giovanni Bisignani. It also is expected to conserve 27,000 tonnes of fuel and eliminate 84,800 tonnes of CO2 emissions. The new route takes a more easterly heading north of L888 and "further demonstrates the Chinese government's clear understanding of the benefits of a successful air transport sector," Bisignani said. Just 30% of Chinese airspace currently is available for civil aviation, resulting in a shortage of international routes and air traffic delays at destinations in east China.

Surging operating revenue and a spike in fuel costs offset one another at Air China (BEJ) in 2005, resulting in a "satisfactory" +0.85% rise in annual profit attributable to shareholders to +CNY2.41 billion/+$299.7 million. "As with other carriers, the rising cost of jet fuel was a major challenge for us," (BEJ) Chairman, Li Jiaxiang said. "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."

Li cited hedging, the use of computerized flight planning systems, fuel surcharges and improved route planning as measures that played a role in "substantially mitigat[ing] the impact of fuel price increases."

Operating revenue increased +14.23% to CNY38.29 billion owing to "robust passenger and cargo volumes," while expenses went up +19.22% to CNY34.62 billion as fuel costs accounted for 34% of the expense bill compared to 28.8% in 2004. Operating profit fell -18.1% to +CNY3.67 billion.

Air China (BEJ) added 25 airplanes in 2005, bringing its fleet to 176 and contributing to an increase in capacity of +8.9% to 70.66 billion (ASK)s. Passenger traffic climbed +12.3% to 52.41 billion (RPK)s, lifting load factor +2.3 points to 74.2% LF. Unit revenue rose +1.8% to CNY0.57.

The carrier said it will continue its aggressive expansion strategy in order to capitalize on the momentum building toward the 2008 Summer Olympics in Beijing and in an effort to stay ahead of an increasingly crowded market featuring growth in privately owned carriers, deregulation and increased competition for slots and labor. It signed contracts for the purchase of 35 new airplanes and the lease of an additional 14 last year.

"We will further execute our strategy of building a leading hub-and-spoke network through strategic alliances and codesharing, while continually improving our management of resources," Li said. "Our plan to establish an objective appraisal and performance management system should further help us position ourselves as the leading domestic and international brand among Chinese airlines."

(CAAC) (CAC) and the National Development and Reform Commission announced an increase in fuel surcharges on domestic routes of less than 800 km to CNY30/$3.74 from CNY20 and on routes greater than 800 km to CNY60 from CNY40. Increases went into effect April 10 and will last until October 10.

Airbus secured Extended Twin-Engine Operations (ETOPS) approval from the European Aviation Safety Agency for A330-243 and A330-343 airplanes fitted with (Trent 772C)s. Airbus said the new engines will improve airplane performance in high altitudes and hotter temperatures. The first A330 fitted with (Trent 772C)s is slated for delivery to Air China (BEJ) in late May.

Boeing is expected to sign contracts shortly with Chinese airlines for 80 737s. The deal is the second part of an order announced late last year for 70 737s. Hainan Airlines (HNA) will take 15, China Southern Airlines (GUN) 10, Xiaman Airlines (XIA) five, and Shandong Airlines (SHG) six, with the balance taken by Air China (BEJ), China Eastern Airlines (CEA), Shanghai Airlines (SHA), and Shenzhen Airlines (SHZ). Airbus secured a similar commitment for 150 A320s last year but apparently signed a contract with CAAC (CAC), listing the orders as part of the year's record-breaking sales.

Later, Air China (BEJ) said it will take 15 737-800s of the 80 737NGs purchased earlier this month by China (CAC), according to an airline spokesperson cited by press reports. The deal is worth approximately $982.8 million.

737-808 (34702, B-5168), Icelandair (ICE) leased. 747-4FTF (34240, B-2476), delivery.

May 2006: As the flag carrier and one of the largest carriers in China, Air China (BEJ) operates most of the country's domestic and international, scheduled passenger and cargo services from its base at Beijing Capital Airport (PEK).

Employees: 29,133.

(IATA) Code: CA - 999. (ICAO) Code: CCA (Callsign - AIR CHINA).

Parent organization/shareholders: China National Aviation Holding (69%); public (21%); Cathay Pacific (CAT) (10%).

Owns: Air China Cargo (51%); Shenzhen Airlines (SHZ) (25%); & Shandong Airlines (SHG) (22.8%).

Alliances: Air Macau (MCU); All Nippon Airways (ANA); Asiana Airlines (AAR); Austrian Airlines (AUL); Cathay Pacific (CAT); Dragonair (DRG); Finnair (FIN); Korean Air (KAL); Lufthansa (DLH); Qatar Airways (QTA); Scandinavian Airlines (SAS); Shanghai Airlines (SHA); (THY) Turkish Airlines; & United Airlines (UAL).

Main Base: Beijing Capital International airport (PEK).

Domestic, Scheduled Destinations: Bangda; Baotou; Beijing; Changchun; Changsha; Changzhou; Chengdu; Chongqing; Dalian; Datong; Daxian; Dayong; Fuzhou; Golmud; Guangzhou; Guilin; Guiyang; Haikou; Hailar; Hangzhou; Harbin; Hefei; Hohhot; Ji'an; Jinan; Jinghong; Kunming; Lanzhou; Lhasa; Lijiang; Linyi; Luxi; Luzhou; Mian Yang; Mudanjiang; Nanchang; Nanjing; Nanning; Nantong; Ningbo; Pan Zhi Hua; Qingdao; Sanya; Shanghai; Shantou; Shenyang; Shenzhen; Song Pan; Taiyuan; Tianjin; Tongliao; Urumqi; Wanxian; Weihai; Wenzhou; Wuhan; Xi'An; Xiangfan; Xichang; Xilinhot; Xingyi; Xining; Yanji; Yantai; Yibin; Yinchuan; Yun Cheng; & Zhengzhou.

International, Scheduled Destinations: Bangkok; Busan; Chicago; Copenhagen; Daegu; Doha; Dubai; Frankfurt; Fukuoka; Helsinki; Hiroshima; Hong Kong; Istanbul; Jakarta; Karachi; Kuala Lumpur; Kuwait; London; Los Angeles; Macau; Melbourne; Milan; Moscow; Munich; Nagoya; New York; Nuremburg; Osaka; Paris; Rome; San Francisco; Sendai; Seoul; Singapore; Stockholm; Sydney; Tokyo; Ulan Batar; Vancouver; Vienna; Washington; & Yangon.

Air China (BEJ) officially will be invited to join the Star Alliance, Lufthansa (DLH)confirmed to German newspaper Handelsblatt, which reported that Chancellor Angela Merkel will attend the signing ceremony in Beijing. The world's largest airline alliance extended a formal invitation to Shanghai Airlines (SHA). Air China (BEJ) is 10% owned by Oneworld's Cathay Pacific (CAT) and there had been speculation earlier this year that it might join Star's rival. But China's largest international carrier, which has relationships with several Star airlines, now appears poised to become the alliance's 20th member.

Less than two weeks after establishing a foothold in China with the addition of Shanghai Airlines (SHA), Star Alliance solidified its presence with the addition of Air China (BEJ), the country's most profitable carrier. Once the two airlines become full members, Star will have bases in both Shanghai and Beijing, giving it a leg up on rivals SkyTeam, which signed a Memo of Understanding (MOU) with Guangzhou-based China Southern Airlines (GUN) in 2004, and Oneworld, which still is without a member based in mainland China and eventually may look to Shanghai's China Eastern Airlines (CEA).

Air China (BEJ) signed the (MOU) with Star in Beijing at a ceremony attended by German Chancellor Angela Merkel, Chinese aviation officials and Star CEO, Jaan Albrecht, who said that the alliance now has "taken the decisive step in implementing our strategy for the Chinese market." Shanghai Airlines (SHA) and Air China (BEJ) will become Star's 19th and 20th members and expand its network to 912 destinations in 160 countries.

"With economic globalization and open skies, the competition in the airline industry will become more and more severe. No one airline can create a global network by itself. In order to survive and develop, airlines have to cooperate with other partners in various forms, including multilateral alliance cooperation," Air China (BEJ) Chairman, Li Jiaxiang said.

Air China (BEJ) operates a fleet of 176 airplanes and flies to 70 domestic and 36 international destinations. It already codeshares and cooperates with Star carriers All Nippon Airways (ANA), Austrian Airlines (AUL), Lufthansa (DLH), Asiana Airlines (AAR), (SAS), United Airlines (UAL), and Varig (VAR).

Nyingchi Airport, located in China's Tibet Autonomous Region, has passed an official quality test by an airport construction team and is ready for operations, according to the Chinaview news service. The audit, carried out by various civil aviation experts, indicates that the CNY700 million/$87.5 million airport is ready to open. Nyingchi, the lowest in altitude of Tibet's three civilian airports, has a 3,000 m runway and is expected to have annual passenger traffic of 120,000.

The Chinese government is expected to invest a further CNY140 billion/$17.43 billion in aviation over the next five years, more than the country spent in the previous 15, according to local media reports. The CAAC (CAC) said the spending would be focused on the construction of 42 new airports, in addition to upgrading existing infrastructure.

The CAAC (CAC) expects the number of Chinese airports to increase from the current 142, to at least 220 by 2020, as the number of airplanes rises from 863 to 1,580 in 2010 and to about 4,000 in 2020.

Top of the regulator's agenda is to reinforce the status of Beijing Capital, Shanghai Pudong and Guangzhou Baiyun as key international hubs, and to upgrade Chengdu, Kunming, Xi'an, Wuhan and Shenyang airports to the status of major regional hubs. Yunnan Province in the southwest of the country will account for nearly one-seventh of the planned spending, as it adds another five airports by 2010.

The CAAC (CAC) expects overall passenger and cargo traffic to grow at an average of +14% annually through 2010, with growth slowing to +11% per year from 2011 to 2020. Last year, domestic airlines carried 138 million passengers, an increase of +15.5% from the previous year. Cargo traffic increased at +13.8% to 3.4 million tons over the same period.

Air China (BEJ) is set to buy +two more 747-400Fs for its Air China Cargo (CAO) unit, in which it holds a 51% stake, according to London financial market sources. The cargo carrier will take one 747-400F this year from Boeing and two 747-400BCFs.

737-79L (34541, B-5227) & 737-808 (34703, B-5169), deliveries. 1 A320-200, Aviation Capital Group (CGP) leased.

June 2006: Cathay Pacific (CAT)'s acquisition of Dragonair (DRG) and its routes into mainland China appeared imminent as trading in the Hong Kong-listed shares of Cathay (CAT), Air China (BEJ), China National Aviation Company, CITIC Pacific and Swire Pacific, was suspended for a third consecutive day, according to press reports. CITIC Managing Director, Henry Fan told reporters he expected an official announcement soon. Cathay (CAT) already holds 17.8% of Dragonair (DRG) and reportedly will pay approximately HK$8 billion/$1 billion in cash and stock for the rest.

It also may double its stake in Air China (BEJ) to 20% for an additional HK$4 billion, according to Bloomberg News. In turn, Air China (BEJ) will obtain 17.5% of Cathay (CAT), making it the third-largest shareholder behind Swire (which also holds 7.7% of Dragonair (DRG)) and CITIC (which owns 28.5% of Dragonair (DRG)). Air China (BEJ) holds 69% of CNAC, Dragonair (DRG)'s largest shareholder at 43.3%.

Cathay (CAT)'s only destinations on the Chinese mainland are Beijing, Xiamen, and Shanghai (freight only).

Later, the much-anticipated change in shareholder structure among Cathay Pacific Airways (CAT), Dragonair (DRG), and Air China (BEJ), announced earlier by owners Swire Pacific, CNAC and CITIC Pacific is set to create the most powerful airline group in Asia. Under the agreement, which is subject to shareholder approvals, Dragonair (DRG) will be wholly owned by Cathay Pacific (CAT), and Air China (BEJ) will acquire a 17.5% stake in (CAT), which in turn will double its holding in Air China (BEJ) to 20%. Swire will remain the principal long-term shareholder in Cathay (CAT). Dragonair (DRG) will continue to operate under its own brand, but under Cathay (CAT) management, while (CAT) and Air China (BEJ) will continue to develop closer ties.

The far-reaching deals end several years of sparring between Cathay (CAT) and Dragonair (DRG) over access to the Chinese mainland. (CAT) part-owned and managed Dragonair (DRG) between 1990 and 1996, when its current ownership structure came into effect, and set the two on a competitive collision course.

Those difficulties manifested themselves in a range of problems, such as Cathay (CAT)'s and Dragonair (DRG)'s inability to offer competitive through fares into China. The emergence of powerful players such as China Southern Airlines (GUN) and China Eastern Airlines (CEA), plus the liberalization of air routes into China, drove the restructuring announced recently.

Philip Chen, CEO of Cathay Pacific (CAT), said that he was "delighted with the share realignment deal reached by Cathay Pacific (CAT), Air China (BEJ), CNAC, CITIC Pacific and Swire Pacific. It will result in a strengthening of Hong Kong's position as the premier aviation hub of the Asia/Pacific region, while at the same time making a significant contribution to the growth of the aviation industry in China. This win-win-win deal means we have created one of the world's strongest airline groupings - - Cathay Pacific (CAT), Dragonair (DRG), and Air China (BEJ)."

Under the agreement, (CAT) will buy the 82.21% of Dragonair (DRG) it does not already own, for HK$8.22 billion/$1.06 billion. Air China (BEJ) will become a substantial shareholder of (CAT) with a 10.16% stake, purchasing shares from Swire and CITIC for HK$5.39 billion. Air China (BEJ) and its CNAC subsidiary will own 17.5% of (CAT), which will double its holding in (BEJ) for HK$4.1 billion.

No changes are expected in the respective carriers' alliance arrangements, with Air China (BEJ) recently joining the Star Alliance and Cathay being a founding member of Oneworld.

Air China (BEJ) intends to raise CNY8 billion/$996.3 million through the sale of 2.7 billion shares on the Shanghai stock exchange later this year, an airline official told reporters. The offering constitutes 28.62% of its existing share capital, the Associated Press reported. The carrier, which already has shares traded in Hong Kong, is awaiting approval from the China Securities Regulatory Commission. China International Capital Corporation, CITIC Securities and Galaxy Securities reportedly will be the underwriters.

Later, Air China (BEJ) offered HK$3.23 billion/$416 million to increase its stake in Cathay Pacific Airways (CAT) to 17.5% as part of a transaction that will privatize China National Aviation Co (CNAC), which controls Air Macau (MCU) and catering, maintenance and ground handling services. (CNAC) agreed to sell its stake in Dragonair (DRG) last week, as part of the deal in which Cathay (CAT) is taking over its fellow Hong Kong airline. "For Air China (BEJ), the privatization will bring the operating units of (CNAC) under our direct control and simplify our shareholding in Cathay Pacific (CAT)," Air China (BEJ) Chairman, Li Jiaxiang said in a statement, according to Bloomberg News. "For (CNAC) shareholders, this privatization reflects an excellent return on their investment." Air China (BEJ) plans to use bank loans to fund the (CNAC) privatization.

Air China (BEJ) will purchase 24 A320 family airplanes for $1.74 billion, Reuters reported. The order is part of the deal Airbus signed with Chinese Aviation Supplies Import and Export Group (CSC) last year for 150 airplanes. China Southern Airlines (GUN) has confirmed it will be getting 50 A320 family airplanes. The deal is part of the 150 A320s ordered by China in December 2006. China Southern (GUN) is expecting delivery of the airplanes in 2009 and 2010. The third carrier to announce its allotment, China Southern (GUN)'s order is valued at $3.3 billion. It will take delivery in 2009 and 2010. China Eastern Airlines (CEA) will take 30. A total of 46 remain to be allocated to three more airlines.

Air China (BEJ) took delivery of its first A330-243 (750, B-6070) (see photo) in Chengdu. The airplane seats 283 passengers in a two-class configuration and will serve high-altitude routes for the carrier's Southwest Branch, which operates six A340-300s and 11 A319s.

A319-115 (2805, B-6223), & 2 A330-243's (750, B-6070; 756, B-6071), deliveries.

July 2006: Air China flew 4.99 billion (RPK)s passenger traffic in June, a +19% increase over the year-ago month. Capacity rose +15.8% to 6.6 billion (ASK)s and load factor climbed +2 points to 75.6% LF.

(SAS) Cargo will secure 100 tons of space per week on thrice-weekly 747-200F flights from Copenhagen to Beijing and Shanghai operated by Air China (BEJ). The deal also allows Air China (BEJ) to purchase capacity on (SAS) flights to China.

Aircraft Maintenance and Engineering Corporation (AMECO) (BEJ) of Beijing will paint four Qantas (QAN) 767-300ERs. The first airplane will be delivered to (Ameco) at the end of July, with three others following nose to tail.

China and Japan reached an air services agreement that provides for a +20% increase in the number of passenger flights between the countries and a doubling of cargo services, Reuters reported. Thirteen carriers from each country will have access, up from the current six. The number of permitted flights will rise to 547 per week, with Chinese carriers operating 300.

2 737-79L's (34542, B-5228; 34543, B-5229), 737-808 (34705, B-5170), Icelandair (ICE) leased, 2 737-8Q8's (30704, B-5172; 30705, B-5173), (ILF) leased, 2 A319-115's (2819, B-6225; 2839, B-6226), & A330-243 (759, B-6072), deliveries.

August 2006: Air China (BEJ)'s first-half profit fell -22.5% to +CNY458 million/+$57.4 million from the +CNY591 million earned in the first six months of 2005. Revenues climbed +17.7% to CNY19.93 billion. (BEJ)'s offering on the Shanghai Stock Exchange earlier this month met with an unenthusiastic response, forcing the carrier to repurchase 123 million A shares. It reduced the number of shares sold by nearly -40% and said it would repurchase up to an additional +600 million shares if they dropped below the initial price by year end.

Qantas (QAN) and Air China (BEJ) reached a codeshare agreement effective September 15, that will see Air China (BEJ) place its code on Qantas (QAN)'s thrice-weekly Sydney - Beijing flights.

Air China (BEJ) secured approval last week from the China Securities Regulatory Commission for the sale of up to 2.7 billion shares, or 28.6% of its existing share capital, on the Shanghai stock exchange. The airline said it is in the process of conducting a required preliminary price consultation to determine the exact number of shares to be issued as well as an offer price. An Air China (BEJ) official previously told reporters the carrier plans to raise CNY8 billion/$1 billion through the sale.

Air China (BEJ), Cathay Pacific Airways (CAT), China National Aviation Co and CITIC Pacific shareholders, approved the proposed realignment that would establish cross-shareholdings between Air China (BEJ) and Cathay (CAT) and make Dragonair (DRG) a (CAT) subsidiary. The long-anticipated deal, announced in June, must receive regulatory approval. Air China (BEJ) Chairman, Li Jiaxiang said the realignment will "create a potent new force in the airline industry."

737-808 (34706, B-5171), Icwlandair (ICE) leased. A319-115 (2847, B-6227), delivery.

September 2006: Air China (BEJ) launched services to Seoul from Dalian (daily aboard an A319) and Tianjin (Saturdays on a 737).

Chinese airlines have been forced to cut fares to Tibet by up to -55% following the opening of the Qinghai - Tibet railway, according to China Daily, as concern grows among carriers over the impact of rail expansion.

The paper reported that nine flights operated by Air China (BEJ), Sichuan Airlines (SIC), and China Southern Airlines (GUN) have been discounted -45% - -55% since September 13. The Qinghai - Tibet railway opened July 1 and the train fare between Chengdu and Lhasa is CNY331/$41 with a sleeper fare of CNY712. Airlines now are offering fares on the route at CNY975.

Such price decreases in the face of rail competition may portend future fare wars between modes of transport in the world's most populous nation. China has embarked upon an aggressive expansion of its railway network and also increased the speed of trains on the existing network. Last year, Siemens AG snared a contract for 60 600-passenger high-speed trains capable of 300 kph for introduction in 2008 connecting China's major cities. This year, many of the express trains had speeds lifted to 200 kph. Since 1997, the speeds of Chinese trains have been boosted four times to meet demand.

By 2020, China expects to build 10,000 km of new railway track with 2,000 km of high-speed track, which will include the $12 billion, 1,300-km Beijing - Shanghai Express. The line will link some of China's wealthiest and most industrialized cities and likely will impede airlines' ability to raise fares on some high-density routes.

SR Technics (SWS) will provide component management services to Air China (BEJ) covering the airline's A330s and A340s. (SWS) will provide component maintenance as well as access to its consignment stock in Taipei and its main stock in Zurich under the six-year, $17.5 million agreement.

Rolls-Royce (RR) announced that Air China (BEJ) signed an $800 million deal for (Trent 1000)s to power its fleet of 15 787s scheduled to begin delivery in June 2008. The agreement includes a long-term TotalCare maintenance package.

A319-115 (2890, B-6228), & A330-343E (780, B-6073), deliveries.

October 2006: Air China (BEJ) said it posted a +CNY3.3 billion/+$417.5 million profit in the third quarter ended September 30.

The carrier did not provide a comparison to the year-ago quarter but said its "stable growth was attributable to the favorable turnaround in the industry, that was driven by the drop in international oil prices, an upward adjustment of fuel surcharges and the continued appreciation of the [yuan]."

Third-quarter revenues were CNY13.94 billion as passenger boardings climbed +14% to 9 million. Load factor rose +2.2 points to a record 80.6% LF as passenger traffic (RPK)s surged +16.4% to 17.36 billion on a capacity increase of +13.2% to 21.53 billion (ASK)s. Yield was CNY0.68. "The company will continue its efforts to increase capacity, expand route networks and explore new markets," it said. Nine-month profit was +CNY3.35 billion on revenues of CNY34.81 billion.

Air China (BEJ) will inaugurate nonstop service from Beijing to New Delhi on October 30th. The airline will operate 3 flights a week, departing Beijing on Mondays, Wednesdays, & Saturdays and New Delhi on Tuesdays, Thursdays, & Sundays, using a 767-200. Air China (BEJ) is looking to eventually fly the route on a daily basis with A330s, A340s or 777s.

Air China (BEJ) will inaugurate nonstop service from Beijing to Madrid on December 10th. The airline will operate 2 flights a week, departing Beijing on Thursdays & Sundays, and departing Madrid on Mondays & Fridays, using a 767.

Air China (BEJ) will inaugurate direct service from Beijing to Sao Paulo on December 10th. The airline will operate 2 flights a week, on Thursdays & Sundays, via Madrid, using a 767.

Air China (BEJ) is close to signing for 10 777s, believed to be six 777-200LRs and four 777-200Fs.

737-86N (35209, B-5175), GECAS (GEF) leased, adorned with an official "Beijing 2008 Olympics" livery, marking the 150th Boeing plane delivered to the carrier.

November 2006: (SAS) Ground Services will provide handling for Air China (BEJ) at London Heathrow (LHR). (SAS) will take care of passenger services and load control and has subcontracted Aviance to provide ramp handling. Air China (BEJ) operates six weekly 747 flights from Beijing to (LHR).

2 737-86Ns (32682, B-5178; 34258, B-5176), (GEF) leased, & A330-243 (785, B-6075), delivery.

December 2006: Air China (BEJ) is preparing to extend its service to Nepal from different Chinese cities from early next year. The airline will operate one flight every day from Lhasa to Kathmandu during July to October 2007. These flights will only be operated in high season. Air China (BEJ) will also add and extend other Kathmandu services.

China Airlines (BEJ) will launch a twice-weekly, Taipei - Stockholm cargo service on December 6 aboard a 747-400F. The outbound flight will stop in Abu Dhabi and Luxembourg, and the return flight will stop in Abu Dhabi and Bangkok.

Sabre Airline Solutions signed a $15 million deal with Air China (BEJ)to implement a new flight operations control center, including Sabre's AirOps and Crew Management suites.

A330-243 (797, B-6076), delivery.

January 2007: China's two top cargo airlines, Air China Cargo (CAO) and China Cargo Airlines (CKK), are set to merge before yearend in a bid to strengthen China's market share over foreign carriers, which currently control about two thirds of the country's air cargo volume. The two cargo airlines, which are affiliated with Air China (BEJ) and China Eastern Airlines (CEA), will merge into one company based in Shanghai, the country's economic hub, under the "China Cargo"'s name. The joint company will be a 50 - 50 venture between (BEJ) and (CEA).

Later, Air China (BEJ) reportedly is planning to set up a Shanghai-based cargo joint venture with Cathay Pacific Airways (CAT). "We are now preparing for the joint venture program and hope to realize practical progress in the cargo business partnership with Cathay (CAT)in the first half of 2007," VP, Fan Cheng said. "How to significantly improve our cargo transport capabilities is an important task for Air China (BEJ) in 2007," he added. He said long-running attempts to reach a similar agreement with China Eastern Airlines (CEA) had failed.

The Chinese government is considering an injection of up to $2 billion into the country's three major airlines to address balance sheet debt problems brought on by high fuel prices.

Sources in the government confirmed the existence of a financial injection plan, first revealed in the "Asian Wall Street Journal."

Beijing generally has tried to maintain a hands-off approach to the fiscal affairs of Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA), but it now believes intervention may be necessary as the carriers have been hit hard by fuel prices that are higher in China due to various levies.

(CFM) International won an order from Air China (BEJ) valued at $345 million for (CFM56-5B)s to power 24 A321s scheduled to be delivered in 2008 to 12. In addition, (BEJ) signed a 15-year maintenance agreement. Air China (BEJ) and (CFM) agreed to establish a Joint Venture (JV) to develop a new Maintenance Repair & Overhaul (MRO) facility in China.

737-86N (35211, B-5179), (GEF) leased & 2 A330-243s (810, B-6079; 815, B-6080), deliveries.

February 2007: Air China (BEJ) launched twice-weekly Beijing - Sao Paulo service, via Madrid, aboard 767s. (BEJ) will launch twice-weekly Beijing - Sapporo (CTS) service from April 18, marking the carrier's seventh Japanese destination.

737-8Q8 (29373, B-5311), (ILF) leased.

March 2007: Air China (BEJ) and Air Macau (MCU) parent Air China Ltd earned a 2006 net profit of +CNY3.19 billion/+$411.8 million, up +86.71% over the prior year, on a +17.4% lift in operating revenue to CNY44.9 billion. Chairman, Li Jiaxiang attributed the result in part to the company's A-share listing in Shanghai, and the restructuring of its cross shareholding with Cathay Pacific Airways (CAT). "The share listing helped stabilize our capital structure and provides us the resources to continue our fleet expansion, while our cross shareholding with Cathay (CAT) offers us valuable know-how in flight service," Li explained. He also noted that the drop in oil prices during the second half of the year brought some relief. The Centre for Asia Pacific Aviation said (BEJ) was China's most profitable airline for the third consecutive year. Total operating expenses increased +22.5% to CNY42.4 billion, with jet fuel accounting for 37%. Passenger boardings rose +14.2% to 34 million, while cargo traffic grew +19% to 3.29 billion (RTK)s. Passenger load factor improved +1.9 points to 75.9% LF.

(BEJ) expects another good year in 2007 thanks to China's rapidly growing economy. The company also predicted it would begin to see benefits related to its affiliation with next year's Olympic Games. "Our strategic relationship with Cathay Pacific Airways (CAT) and our prospective membership in the Star Alliance will further add to the momentum," Li added.

(BEJ) announced an agreement with Colombia's Avianca (AVI) that offers customers connecting itineraries between China and South America, and lays the groundwork for "our two airlines [to] find numerous ways to cooperate and serve passengers," according to (BEJ) Senior VP, Zhang Lan. The carrier launched 767 service to Sao Paulo via Madrid several months ago.

Oneworld is discussing membership with China Eastern Airlines (CEA), alliance Managing Partner, John McCulloch announced in a briefing with reporters cited by Reuters. Oneworld has yet to recruit a member from mainline China, while SkyTeam is preparing to welcome China Southern Airlines (GUN), and Star Alliance will admit Air China (BEJ) and Shanghai Airlines (SHA).

2 737-8Q8s (29374, B-5312; 30716, B-5313), (ILF) leased.

April 2007: Air China (BEJ) increased Beijing - San Francisco service to daily from five-times-weekly. Air China (BEJ) launched twice-weekly Beijing - Sapporo flights.

Air China (BEJ) unveiled details of the new cargo airline it plans to operate in partnership with Cathay Pacific Airways (CAT), to be based on the existing China Cargo Airlines (CKK) that flies out of Beijing. The new carrier, in which (BEJ) will hold a 51% stake, is scheduled to launch in June, and will hub in Shanghai. (BEJ) currently holds 51% of (CKK), while Citic Pacific and Beijing Capital Airport Group have stakes of 25% and 24% respectively. "We are discussing with Citic Pacific and Beijing Capital Airport Group on how to cede their shares in China Cargo Airlines (CKK). They can either hold (BEJ)'s shares in exchange or sell their stakes in cash," (BEJ) Planning & Development Department Deputy Director, Hu Pengbin said.

There is widespread speculation that Cathay (CAT) will invest in cargo airplanes for its 49% stake in the new carrier, but that is just one option, (BEJ) noted. Last year, (CAT) introduced two 747-400BCFs and posted record cargo revenue of HK$11.98 billion/$1.53 billion. The cargo venture is said to be an important part of (BEJ)'s strategy to build Shanghai as a hub, which involves expanding international services and integrating a subsidiary from nearby Zhejiang Province into a new company employing approximately 1,000 people to control its business in the Yangtze Delta region, according to (BEJ) VP, Yang Lihua. It intends to establish a cargo station at (PVG) capable of processing 1.2 millions tons each year.

Chinese airlines remain interested in aligning with global alliances despite the difficulties associated with joining up or integrating. With Air China (BEJ) and Shanghai Airlines (SHA) committed to Star Alliance and China Southern Airlines (GUN) set to join SkyTeam, speculation has turned toward Oneworld and Hainan Airlines (HNA), which recently opened a new Beijing - Osaka service in cooperation with Japan Airlines (JAL). Hainan (HNA) parent (HNA) Group told "China Business" that it established a working group in January to start preparing the carrier to join an alliance. But Hainan Airlines (HNA) may be in an inferior negotiating position, according to industry analysts, because it is based at Haikou in the deep south, while alliances are targeting carriers in Beijing (Air China (BEJ)), Shanghai (Shanghai Airlines (SHA)) and Guangzhou (China Southern (GUN)). Oneworld Managing Partner, John McCulloch told reporters last month that his group also was negotiating with China Eastern Airlines (CEA), which is based in Shanghai. Even if an alliance regards a Chinese carrier as a good fit, the hurdles that an airline must negotiate before meeting alliance standards can be significant. For example, Shanghai Airlines (SHA) has had to work on improving or restructuring its Information Technology (IT), safety management, loyalty program, sales and marketing, legal affairs and human resources departments to conform to Star requirements. The company has admitted that it has taken a long time to meet those requirements and that the price for its Star membership is "really high." Chinese airlines also may suffer when allying with foreign carriers, as they have incurred heavy losses on international routes and have been forced to open their own markets to more experienced foreign competitors, while being unable to tap into the potential offered by foreign markets. But Shanghai Airlines (SHA) Chairman, Zhou Chi said it was worth the effort. "One single airline can't establish a foothold in every part of the world due to limitations set by national air traffic rights," he explained. "But by joining airline alliances, we can expand our international route network and better utilize our existing capacity to improve efficiency without increasing investment and fleet expansion."

This year (BEJ) plans to take delivery of 24 airplanes comprising four A319s, two A321s, seven A330-200s and 11 737-800s.

May 2007: Air China (BEJ) flew 5.57 billion (RPK)s passenger traffic in April, up +12% on the year-ago month. Capacity climbed +11.5% to 7.19 billion (ASK)s, lifting load factor +0.3 point to 77.5% LF.

Air China (BEJ) reported a net profit of +CNY403 million/+$52.1 million for the first quarter, a result that contrasts sharply with the recently announced losses by China Eastern Airlines (CEA), and China Southern Airlines (GUN). (BEJ) did not provide year-ago figures. The company cited "expansion of its principal operations and the investment income derived from Cathay Pacific Airways (CAT)" as key to its performance. Operating revenue reached CNY10.47 billion against costs of CNY10.44 billion. (BEJ) said it expects its second-quarter earnings to more than double the year-ago period's profit if oil prices do not change. It raised its stake in loss-making China Eastern (CEA) recently.

China Eastern Airlines (CEA) stock continued to soar as widespread speculation continued that Singapore Airlines (SIA) is on the verge of taking a significant stake in the carrier, despite (CEA)'s insistence that concluding any deal requires more time. In the statement, (CEA) refused to offer details about any negotiations with (SIA), the most probable strategic investor. An (SIA) spokesperson confirmed that the carriers are "talking about possible cooperation" but said in a statement cited by press reports that "there have been no decisions to pursue any other relationships at this point in time." An internal source at (CEA) said that the company has little leverage in talks with (SIA) because of its poor financial performance. "That's why it's been so hard to reach an agreement with (SIA), even though the talks have lasted for ten months," the source said. China Eastern Airline (CEA) Group holds a 59.9% share of the carrier and intends to sell off a 20% to 25% stake to a new investor, while maintaining a controlling stake. Insiders speculate that it may opt for circulation of additional A and H shares tailored for (SIA), although this practice also may challenge the controlling stake position. Analysts have noted that the cheaper H shares will be more attractive to (SIA), which may walk away if A share prices rise higher than expected.

Recently, Air China (BEJ) expanded its stake in (CEA) to 8.26% from 7.88% through the purchase of 6 million H circulating shares. JP Morgan also raised its stake to 5.12% by paying HK$12.8 million/$1.6 million for 5.22 million H shares. UBS noted that a "drop of fuel price, appreciation of the yuan and strong market demand" will be main contributors to (CEA)'s turnaround this year, but that the deal with (SIA) is key. (CEA) reported a 2006 net loss of -CNY2.78 billion/-$360.9 million and a -CNY510.9 million loss in the first quarter.

Rockwell Collins announced that Air China (BEJ) selected its MultiScan Hazard Detection System along with a "broad range of avionics" including the GLU-925 Multi-Mode Receiver, for 25 737NGs and 24 A320s/A321s. Deliveries are expected to begin in the fall.

While USA airlines enthusiastically applauded the newly signed air services agreement with China, their Asian counterparts admit they are at a competitive disadvantage compared to the relatively strong carriers across the Pacific. While American airlines have been focusing more on international service and already are on the Public Relations (PR) offensive, in an attempt to win the extra routes to China, Chinese carriers are equating strength with domestic market share. They commonly launch fare wars in order to attract passengers, and industry analysts are concerned this tactic may be used to gain a competitive edge in the expanded USA - China market. As USA carriers aim to improve long-haul service, Chinese airlines are engaged in "wasteful competition" that degrades collective profits, analysts have said.

The country's big three - - Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA), - - all are suffering losses on their USA routes. Air China (BEJ)'s investment in an upgraded first (F) and business class (C) product helped boost premium revenue last year to CNY3.79 billion/$494.6 million, up +19.8% from 2005, and may convince others to follow suit. It also has raised transpacific fares to match those charged by USA carriers.

But (BEJ) has said it has little interest in serving the USA from cities, other than Beijing and Shanghai, while China Eastern (CEA)'s admission that its new service to New York (JFK) launched late last year has fallen short of projections, may warn competitors to proceed with caution.

737-86N (32692, B-5325), and A330-243 (839, B-6081), deliveries.

June 2007: Air China (BEJ) plans to operate a dual-class A340 in daily Beijing - London Heathrow service from June 21. It currently operates the airplane to Frankfurt from Beijing and Shanghai.

Air New Zealand (ANZ) will commence reciprocal codeshare flights with Air China (BEJ) effective July 1. The agreement will see (BEJ) place its code on (ANZ)'s Shanghai - Auckland and selected transtasman flights, while (ANZ) will codeshare on (BEJ)'s flights to Australia.

While China Eastern Airlines (CEA) is on the verge of selling a 25% stake to Singapore Airlines (SIA), Shanghai Airlines (SHA) appears to be interested finding its own foreign investor.

(ANA) President & CEO, Mineo Yamamoto revealed that the Japanese carrier is considering a cross-shareholding arrangement with its future Star Alliance (SAL) partner. Yamamoto said in Tokyo that an arrangement with Shanghai Airlines (SHA) would be similar to the agreement reached with Asiana Airlines (AAR) last month, under which each carrier took a $12 million stake in the other.

Shanghai Airlines (SHA) Secretary of the Board, Xu Junmin said the carrier has yet to receive the proposal from (ANA), while noting that it does have "cooperative relations with (ANA) on codeshare."

Meanwhile, Air China (BEJ) also has contacted Shanghai Airlines (SHA) about a deeper cooperation. With principal hubs in Beijing and Chengdu, (BEJ) has sought greater penetration in the Shanghai market. Shanghai Airlines (SHA) President, Zhou Chi has insisted that his carrier should "go its own way," despite the interest from potential suitors. (BEJ) will join Shanghai (SHA) and (ANA) in the Star Alliance (SAL) by year end.

China's traditionally isolationist flag carriers are taking the initiative to ally with foreign counterparts in order to take advantage of increasing liberalization and maintain their competitive position. Among the three principal carriers, China Eastern Airlines (CEA) is the only one uncommitted to a global alliance, preferring to seal its partnership with Singapore Airlines (SIA) first. (CEA) President, Li Fenghua said that (SIA)'s investment does not tie his carrier to the Star Alliance (SAL), nor does the fact that Oneworld (ONW) has yet to secure a Chinese member, render that alliance the only option. "We are leaving all the options open, as the point is to identify which airline alliance is the most suitable for us to boost growth," he said.

Meanwhile, Air China (BEJ) and China Southern Airlines (GUN) are restructuring various departments to meet requirements established by Star Alliance (SAL) and SkyTeam (SKT), respectively. (BEJ) expects to join the Star Alliance (SAL) formally in December. "Our top priority is to join the Star Alliance (SAL), as we will be able to optimize our network through deeper cooperation with other Star Alliance (SAL) members to earn profit," Managing Director International Affairs & Cooperation, Lou Yongfeng said at the recent (IATA) (ITA) Annual General Meeting (AGM) in Vancouver. Lou said boosting airport infrastructure is key to meeting the Star Alliance standards. To that end, (BEJ) convened a conference in Sichuan Province at which leaders from 33 domestic airports committed to supporting the carrier's effort.

China Southern Airlines (GUN) expects to join SkyTeam (SKT) this year as well, which domestic industry analysts predict will help shore up the carrier's thin international network. Chinese airlines also are keen to cooperate on cargo operations. Domestic carriers' share of the international cargo market plummeted from 65.6% in 1995 to the current 23.8%, and they are looking for foreign partnerships more frequently in order to reverse that trend. For example, Air China (BEJ) expects to launch a Shanghai-based cargo carrier with Cathay Pacific Airways (CAT) this year, while (GUN) has confirmed it is talking with Air France (AFA)/(KLM) about a cargo joint venture.

With China's big three committed to finding support abroad, industry analysts are indicating that smaller domestic carriers may be unable to compete unless they take similar steps.

CHAMP Cargosystems said 28 "of the world's leading cargo carriers" are switching over to the new Web-enabled and Java-based version of ULD Manager. Among them are Air China (BEJ), Finnair (FIN), Icelandair (ICE), and Saudi Arabian Airlines (SVA).

The Chinese commercial aviation industry appeared to post a significant turnaround in 2006, with a collective net profit of +CNY2.38 billion/+$311 million compared with a -CNY1.35 billion loss in 2005. However, that reversal, outlined in the recently released (CAAC) (CAC) annual report, largely was a result of Air China (BEJ)'s success. The Beijing carrier reported a +CNY3.19 billion net last year, which helped boost the industry back toward 2004 profit levels.
Combined industry revenue climbed +18.4% to +CNY158.9 billion against a +19.4% lift in expenses to CNY135.7 billion. China's airlines enjoyed a +15.5% year-over-year rise in passengers to 160 million and a +13.9% gain in cargo to 3.49 million tonnes.

In 2004, China's commercial carriers posted net earnings of +CNY6.23 billion, accounting for 71.7% of the profit generated by the country's entire air transport industry. But that ratio slipped to 34.7% in 2006, a drop that industry analysts attributed to increased competition, the monopoly position held by airports and oil companies overcharging for their services.

Carriers improved on their first-quarter performance as well, reporting a combined net loss of -CNY820 million that narrowed from a -CNY2.14 billion deficit in the year-ago quarter. Citing robust market demand and (CAAC) (CAC)'s deepening reforms, analysts have forecast an industrywide net profit of +CNY4 billion in 2007.

Shenzhen Airlines (SHZ) and Air China (BEJ) each ordered Aviation Partners Boeing (APB) blended winglet shipsets for 25 737-800s scheduled to deliver from February 2008 through 2010 (Shenzhen - (SHZ)) and from October 2007 through 2010 (Air China - (BEJ)).

China Eastern Airlines (CEA) has demonstrated a Required Navigation Performance (RNP) approach into Tibet's Linzhi airport. The 737-300 flight was a cooperative between the General Administration of Civil Aviation of China (CAAC), the (FAA), and Boeing. The (CAAC) has now formally approved Air China (BEJ)'s use of (RNP) procedures at the airport.

737-86N (35214, B-5326), (GEF) leased.

July 2007: China's big three airlines - - Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA) - - expect to post first-half profits, thanks largely to "continuous growth of the domestic market" and the appreciation of the yuan. China Southern (GUN) said it expected a reversal from its -CNY835 million/-$110.4 million loss in the year-ago semester, while earlier, Air China (BEJ) said in a filing with the Shanghai Stock Exchange, that it expected to report a profit more than >20 times greater than the +CNY45.8 million earned in the first six months of 2006. China Eastern (CEA) is expecting to return to the black following a -CNY40 million loss in the 2006 first half.

Air China (BEJ) and British Airways (BAB) introduced interline e-ticketing this month. (BEJ) said it has similar agreements with 13 other carriers including United Airlines (UAL), Singapore Airlines (SIA), Northwest Airlines (NWA), and Cathay Pacific Airways (CAT). It aims to have approximately 30 partners by year end, including Japan Airlines (JAL), Continental Airlines (CAL), and its future Star Alliance (SAL) partners.

Air China (BEJ) will take delivery of 23 A320s, that were part of the government's purchase of 150 airplanes, concluded last fall, according to widespread press reports from China. (BEJ) will take the airplanes, worth approximately $1.41 billion at list price, between January 2009 and December 2012, according to a company statement. Its capacity will rise +5.9% with the new airplanes.

2 A319-115s (3195, B-6235 "Gabriel;" 3200, B-6236), deliveries.

August 2007: Air China (BEJ) and Air Macau (MCU) parent, Air China Ltd earned net income of +CNY1.57 billion/+$207.4 million in the first half under international accounting standards, up +242.6% from the year-ago semester profit on a +17.2% lift in operating revenue to CNY23.35 billion. (BEJ) explained that its earlier projected year-over-year increase of +2000% was calculated based on the old domestic accounting standard. Chairman, Li Jiaxiang attributed the result in part to the "fast-growing Chinese economy, accelerating demand for air traffic and remarkable improvement in operating efficiency," which he noted "mitigated the negative effects of higher fuel prices."
In addition, (BEJ) recorded a gain of +CNY350 million from its share realignment deal with Cathay Pacific Airways (CAT) last year, and benefited from a currency exchange gain of +CNY867.5 million.
Operating expenses rose +15.5% to CNY21.99 billion. Passenger boardings jumped +13.7% to 17.9 million and load factor improved +2 points to 75.8% LF. Cargo traffic grew +19.2% to 1.87 billion (FTK)s.

Looking ahead, (BEJ) said it is committed to reinforcing its service brand and expects a better result in the second half, due to "rapid growth of China's economy and further liberalization of China's aviation industry."

Air China (BEJ) will invest CNY5 billion/$657.9 million to establish the country's largest flight simulator training base. It will be located in Shunyi District in suburban Beijing. (BEJ) reached a deal with district authorities yesterday. The complex will comprise 30 full-motion flight simulators, eight fixed-base simulators, a cabin crew training center, a Maintenance Repair & Overhaul (MRO) training center, ground-handling service training center, and other relevant support facilities, that the airline said will help reduce its long-term dependence on foreign training resources. (BEJ)'s current fleet numbers 207 airplanes and it expects that to rise to 306 by 2010.

While USA majors lobby and issue competing press releases touting their proposals to serve China under the expanded aviation agreement signed by the two countries, four small Chinese carriers have applied to the (CAAC) (CAC) for the right to operate transpacific services in a market traditionally dominated by the country's big three and their USA counterparts. Despite the fact that Chinese airlines have faced significant competitive disadvantages on routes to the USA, four carriers - - Shanghai Airlines (SHA) Cargo, Hainan Airlines (HNA), Jade Cargo International (JDC) and Great Wall Airlines (GWZ) - - plan to operate transpacific services, and each has received approval from the (CAAC) (CAC), according to a statement from the regulator.

Shanghai Airlines (SHA) is scheduled to fly from Pudong (PVG) to Los Angeles via Anchorage (ANC) beginning in September, and to Dallas/Fort Worth (DFW) via (ANC) from next April. Jade (JDC) intends to operate a Shenzhen - (PVG) - Portland, Oregon - (DFW) - Portland - (PVG) routing, and a Shenzhen- (ANC) - Chicago O'Hare (ORD) flight beginning this month.

In March, Great Wall (GWZ) expects to fly freighters to Los Angeles (LAX) and (ORD) via (PVG) - Seoul - (ANC) and beginning June 8, Hainan (HNA) will operate passenger flights between Beijing and Seattle. Hainan (HNA) never before has applied to serve the USA. It also has applied to serve Mexico City from Beijing (PEK) from March 30, and last month, it started flights to St Petersburg. The local analyst community has suggested that the carrier is expanding internationally to pave the way for the launch of Grand China Air.

The industry in China is hoping that the seven new cargo routes to the USA will help domestic airlines improve on the 30% market share they currently hold in the international freight market. The difficulties in competing for passenger traffic were highlighted by the lack of interest from Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA) in increasing their transpacific operations. (BEJ) Public Relations Director, Wang Yongsheng confirmed that "in the short term, we won't apply for any new routes to the USA," as (BEJ) already serves (LAX), San Francisco and New York (JFK).

In response to the increasing competition posed by railroads, (CAAC) (CAC) asked Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA), Shanghai Airlines (SHA), and Hainan Airlines (HNA) to cooperate on the Golden Route of Beijing - Shanghai, and help make transport more efficient. Launched August 6, the new "Air Express Service (AES)" has met with mixed reaction so far. Nearly 4.2 million passengers traveled on the route in 2006, accounting for 3% of China's total passenger traffic. (CAAC) (CAC) cited its desire to "facilitate business customers to enjoy faster air service" as the reason behind (AES). Of the 37 daily flights between the two cities, (BEJ) operates 14, and (CEA) 11. Average load factor exceeds >75%.
(AES) features a flight every half hour and all tickets are fully and freely endorsable. Average travel time has been cut by as much as 40% to 3 hours as the five carriers now offer unified ground handling operations, dedicated boarding and security areas and a unified billing and accounting system. While reports last week featured some support for the faster service, there also was widespread concern and speculation that (AES) was the front for an alliance that would allow the five airlines to manipulate ticket prices. The fare on the route indeed was raised while popular discounted tickets briefly disappeared. (CAAC) (CAC) denied the speculation, while (CEA) explained that the hike was due to the increased costs associated with the unified ground handling operation. Late last week, the discounted price was reintroduced as (CAAC) (CAC) clarified its antimonopoly position.

Industry analysts have noted their disapproval, arguing that market forces must dictate demand and fares and not a forced cooperation initiated by (CAAC) (CAC). The freely endorsable tickets mean that schedule and slots will determine each carrier's load. If one of the five promotes and sells a deeply discounted ticket, the other four could pay.

Despite the nascent controversy, (CAAC) (CAC) said it would consider promoting similar service on other important business trunk routes from Beijing to Guangzhou, Shenzhen and Chengdu, plus Shanghai - Shenzhen. China Southern (GUN) Beijing Branch, Vice Managing Director, Li Jun said last week that "as far as I am concerned, (CAAC) (CAC) has finished the market research for these four routes."

Naverus said that an Air China (BEJ) A319 became the first Airbus (EDS) airplane to use Required Navigation Performance (RNP) in revenue service, when it took off from Lhasa on August 23.

(ABX) Air agreed to purchase a 767-200ER from Air China (BEJ) and convert it to a freighter for long-haul international operations. The Wilmington, Ohio-based cargo carrier projected the total cost to purchase, modify and put the airplane into revenue service at approximately $23 million. (ABX) primarily operates as a (DHL) subservice carrier in the USA, but is eager to grow non-(DHL) operations outside North America. "We continue to expand our presence in the (ACMI) wet-lease charter industry and look forward to adding this airplane to our 767s already deployed with (ACMI) customers serving the South American and Asia/Pacific markets," President and CEO, Joe Hete said. The 767 will be delivered to (ABX) Air in the fourth quarter and then sent to (VEM) Maintenance & Engineering (VAR) in Brazil for cargo conversion. It is expected to enter service in the second quarter of 2008, likely becoming the 43rd 767 in (ABX)'s fleet.

A319-115 (3226, B-6237), delivery.

September 2007: Air China (BEJ) announced an expansion of its international network comprising 12 new routes to Europe and the USA in 2008 and 2009, as well as more frequencies on nine additional routes to the West. According to the long-haul routes distribution program released by the (CAAC) (CAC), Air China (BEJ) will begin serving Berlin, Istanbul and Warsaw from Beijing in 2008. The following year, it will begin flying daily from the capital to Toronto, Washington Dulles, Manchester, Zurich, Dusseldorf, Vienna and Milan, and from Shanghai to San Francisco and Rome.

(BEJ) has said it is committed to working with partner Cathay Pacific Airways (CAT) and other Star Alliance (SAL) members, to boost its position in the USA and Europe, as "in recent years, we have begun to make a turnaround on long-haul routes to Western countries," according to CEO, Cai Jianjiang.

In addition, China Southern Airlines (GUN), China Eastern Airlines (CEA), Hainan Airlines (HNA), and Shanghai Airlines (SHA) are scheduled to open new routes to the USA, under the (CAAC) (CAC) program, despite the fact that Chinese carriers collectively suffer heavy losses in transpacific operations. Industry analysts have pointed out that conditions may improve, if the USA and China sign a tourism agreement this year, that will ease USA visa restrictions on Chinese citizens.

Next year, (GUN) will open daily Beijing - Newark, and Guangzhou - Moscow flights, while (CEA) will start twice-weekly Shanghai - Los Angeles service. Hainan (HNA) will fly four-times-weekly from Beijing to Berlin and Seattle, and Shanghai Airlines (SHA) will fly from its namesake city to Vienna (five-times-weekly), Hamburg and Zurich (both thrice-weekly).

In 2009, (GUN) will fly from Beijing to Detroit and London, and from Guangzhou to Vancouver (all daily). Hainan (HNA) will open daily service from Beijing to Chicago and Newark, and Shanghai Airlines (SHA) will fly to Seattle and Los Angeles.

(ANA), Shanghai Airlines (SHA), and Air China (BEJ) will codeshare on flights between Tokyo Haneda and Shanghai Hongqiao beginning September 29. The flights, operated by (ANA) and Shanghai (SHA), will be introduced from the mostly domestic airports to commemorate the 35th anniversary of the normalization of diplomatic ties between the countries, (ANA) said. Japan Airlines (JAL) also will operate the route, flying daily from September 29, aboard a 767, switching to a 747-400 on October 28. China Eastern Airlines (CEA) will codeshare on those flights and also operate its own daily service.

Cathay Pacific Airways (CAT) abruptly backed away from its proposed bid to buy a stake in China Eastern Airlines (CEA), that could have trumped the share sale agreement between (CEA) and Singapore Airlines (SIA). (SIA) and its parent, Temasek earlier this month agreed to purchase 15.7% and 8.3% stakes respectively in (CEA), but the deal has not yet been approved by (CEA) shareholders. Cathay (CAT) requested the suspension of trading of its shares on the Hong Kong Stock Exchange "pending the announcement of a proposed transaction." Widespread reports speculated that (CAT) and Air China (BEJ) were preparing to invest $4 billion jointly in (CEA). But (CAT) issued a statement saying the purchase of (CEA) shares "will not now proceed." It offered no explanation for why it backed away from the deal, and said its shares will begin trading again. Air China (BEJ) said in a statement it would make no offer for (CEA) shares for at least "the next three months."

737-86N (35219, B-5327), (GEF) leased, 767-2J6ER (23307), to (ABX), A319-115 (3250, B-6238), and A330-243 (860, B-6090), deliveries.

October 2007: Air China (BEJ) flew 5.94 billion (RPK)s passenger traffic in September, up +6% from the year-ago month. Capacity climbed +1.4% to 7.13 billion (ASK)s, lifting load factor +3.6 points to 83.3% LF.

Air China (BEJ) reported third-quarter net income of +CNY2.19 billion/+$292 million, down -26.5% from a +CNY2.98 billion net profit in the year-ago quarter, that was boosted significantly by a one-time gain from the sale of its equity interest in Dragonair (DRG). Excluding the gain, (BEJ) said its net profit for the reporting period ended September 30, grew +92.8%. Third-quarter revenue was CNY14.47 billion, and operating profit was +CNY2.83 billion, according to a company statement. Citing "the continuing boom of the [Chinese] airline industry and traditional peak traveling season," (BEJ) reported a +5.4% rise to 19.2 billion (RPK)s in the third quarter. International traffic grew +4.9%, while domestic traffic lifted +6.7%. Load factor was 82.1% LF, up +0.7 point. Cargo traffic increased +9.2% to 1 billion (FTK)s on a -2.3% decrease in capacity to 1.72 billion (ATK)s. (BEJ) said net profit for the first nine months of 2007 was +CNY3.5 billion.

Despite its abrupt withdrawal from the deal to purchase a major stake in China Eastern Airlines (CEA) in conjunction with Cathay Pacific Airways (CAT) last month, Air China (BEJ) still is considering a merger and will evaluate its options over the next three months, President, Li Jiaxiang told reporters after attending the Communist Party of China's national congress in Beijing. Li explained that (BEJ) backed off the (CEA) deal with (CAT), because China Eastern (CEA)'s share value was too high. That deal would have trumped an agreement reached earlier in September, under which Singapore Airlines (SIA) and parent Temasek agreed to purchase 15.7% and 8.3% stakes respectively in (CEA).

Industry analysts noted that Shanghai's importance as an aviation hub was the driver behind the (BEJ)/(CAT) bid for a major stake in (CEA) in competition with (SIA). Approximately 50% of China's total passenger volume and 70% of cargo volume pass through the Yangtze River Delta Region centered on Shanghai. (CEA) currently has a 36% share of the Shanghai market, while (BEJ) holds 12%, and (CAT) with Dragonair (DRG) have 4%. "We will never give up on the Shanghai market as it plays a significant role in our strategy and we can expand our Shanghai market share in many ways," (BEJ) Board Secretary, Huang Bin said. He noted that (BEJ) is moving forward with its plan to launch a Shanghai-based joint venture cargo carrier with Cathay (CAT).

Consolidation appears to be the development trend in China's airline industry, but Hainan Airlines (HNA) Group President, Chen Feng said that the "super carrier" idea promoted by some officials will not work. Chen was speaking after attending the Communist Party of China's national congress in Beijing. He noted that Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA) and Hainan (HNA) have controlled 90% of the domestic market since 2002, despite the increase in new entrants. "I don't think there is a possibility that these four bigger airlines will merge," he said. Air China (BEJ) President, Li Jiaxiang has insisted that "merger and consolidation with other domestic carriers" is one of (BEJ)'s targets in the next few years.

Li said that he is negotiating with Boeing (TBC) on a solution to the 787 delay. (BEJ) was scheduled to take delivery of its first Dreamliner next July in time for service related to the Beijing Olympics, Reuters reported. It ordered 15 787s in 2005. Li also said he would not exclude the possibility of ordering the A380 in the future.

737-89L (36483, B-5341), and 2 A330-243s (867, B-6091; 873, B-6091), deliveries.

November 2007: Air China (BEJ) launched thrice-weekly, Beijing - Sydney flights aboard A330s. The carrier now offers 10 weekly flights between China and Australia.

Air China (BEJ) will issue up to 400 million new "A" shares, to finance the acquisition of 54 airplanes and provide a +CNY1.5 billion/+$200.8 million supplement to its working capital, according to widespread press reports from China. The carrier has 15 787s, 24 A320 family airplanes, and 15 737s on order. The plan is subject to regulatory approval. Shares, which will not be available to most foreign investors, will amount to 5.1% of (BEJ)'s existing A-share capital, "Reuters" reported.

Chinese carriers responded to climbing oil prices by raising fuel surcharges on domestic services +20% to +25%. The levy on flights of fewer than 800 km increased to CNY60/$8.04 from CNY50 per ticket, while the fee on flights of 800 km or more, went from CNY80 to CNY100. China raised the domestic price of jet fuel by CNY500 per ton, starting November 1, a move that industry insiders said
was the catalyst for the surcharge hike. The fourth quarter is considered the domestic low season. With a fuel price increase of just CNY100 per ton, Air China (BEJ)'s net profit will be cut by -CNY180 billion, while net incomes of China Southern Airlines (GUN), and China Eastern Airlines (CEA) will be reduced by -CNY250 million and -CNY220 million respectively, according to China (CITIC)
Securities. Industry analysts predict that Chinese carriers will raise the fuel surcharge on international routes soon.

China expanded its airspace capacity from November 22, by implementing Reduced Vertical Separation Minima (RVSM) in order to be better prepared for next summer's Olympics. Under the new rule, the (CAAC) (CAC) halved the height of each flight layer between 8,900 m and 12,500 m, increasing the number of layers from 7 to 13, and nearly doubling the number of airplanes that can fly through the same area simultaneously. The regulator noted that Sanya, Hong Kong and Taipei are excluded as these cities already have implemented (RVSM).
Chinese carriers welcomed the new policy. "We are pleased that (RVSM) has been adopted, as it can alleviate air traffic congestion and reduce flight delays to improve our efficiency," Air China (BEJ) Public Relations Director, Wang Yongsheng said. China Southern Airlines (GUN) said it is considering the resumption of certain flights that had been cut from the schedule, and adding more frequencies on high-load routes, according to Beijing Brance Co Vice Managing Director, Li Jun. With the expanded airspace capacity, local industry analysts pointed out that fuel efficiency can be improved by +0.7% on routes shorter than 500 nm and +1% on medium/long-haul routes, which will lead to an annual collective profit increase of +CNY400 million/+$54 million for Chinese airlines.

Air China (BEJ) plans to order 40 Airbus (EDS) airplane in the next five years to support its European expansion, President, Li Jiaxiang revealed at the (EU) - China Business Summit in Beijing.

(BEJ) launched twice-weekly Beijing - Dubai - Athens service aboard a 767, and Li said it will start serving Berlin, Istanbul, and Warsaw from Beijing in March, and will begin flying daily from the capital to Manchester, Zurich, Dusseldorf, Vienna, and Milan, and from Shanghai to Rome in 2009. "This year, we have made a turnaround and earned a profit on our routes to Europe for the first time," he noted.

Li predicted Airbus (EDS) will continue to increase its share of the Chinese market and will reach the same level as Boeing (TBC) by 2011. Airbus (EDS) currently holds a 35% share in China, while Boeing (TBC)has about 60%.

737-86N (35221, B-5328), (GEF) leased, and 737-89L (36484, B-5342), delivery.

December 2007: The China Eastern Airlines (CEA) shareholders conference that will decide the fate of the Singapore Airlines (SIA) stake purchase is drawing near, and Air China (BEJ) parent, China National Aviation Corp (CNAC) again has raised its stake in (CEA). (CNAC) upped its share to 12.07% from 11.02%, by purchasing its 4.278 million "H" shares, according to data released by the Hong Kong Stock Exchange. (CEA) Board Secretary, Luo Zhuping declined to comment, but insisted the carrier's deal with (SIA) has been approved by Beijing, although it still needs to be okayed by (CEA) shareholders on January 8. (CNAC) has increased its holding in (CEA) nine times since May, deepening speculation that (BEJ) may make a more limited purchase of (CEA) shares during the December 18 to January 8 period, that could trump the (SIA)/Temasek deal. In October, (BEJ) President, Li Jiaxiang said the airline still is considering a merger and will evaluate its options over a period that will expire December 18.

Under the motto "Sharing Unbounded Space," Air China (BEJ) and Shanghai Airlines (SHA) formally joined the Star Alliance (SAL) at a ceremony held in the vast new Terminal 3 at Beijing Capital International Airport. With eight Star (SAL) member airplanes lined up in front of the imposing building and the Chief Executives (CEO)s of all 19 member carriers, as well future members Turkish Airlines (THY) and EgyptAir (EGP) present, Star (SAL), its new members, and Chinese civil aviation authorities spared no effort to make the event memorable. "This is an historical moment. The world's fastest growing and largest airline alliance, the Star Alliance (SAL), has arrived in the world's fastest growing and largest country, China. By becoming a member of the Star Alliance (SAL), China's premier airline, Air China (BEJ), is set to undergo many years of strategic cooperation with a large group of the world's leading airlines," (BEJ) Chairman, Li Jiaxiang said proudly.

Air China (BEJ) is the country's flag carrier and operates a fleet of 212 airplanes on a network spanning 26 countries from its hubs in Beijing and Chengdu. It was listed on the Hong Kong Stock Exchange and London Stock Exchange in December 2004. Its smaller, Shanghai-based counterpart (SHA), operates 59 airplanes on more than 140 domestic, international and regional routes. (SHA) plans to expand its fleet by up to 100 airplanes by 2010. In 2004, (SHA) became the first Chinese airline to achieve International Operational Safety Audit (IOSA) certification. "By joining the Star Alliance (SAL), we believe Shanghai Airlines (SHA) has a brighter future ahead of it," Chairman, Zhou Chi said, adding the carrier will "serve as a bridge between China and the world via its Shanghai hub."

With the addition of the pair, Star (SAL) now has 19 member carriers operating 17,000 daily flights to 897 destinations in 160 countries. On domestic routes alone, Air China (BEJ) and Shanghai Airlines (SHA) have added more than >40 new destinations to the partnership. "China is one the fastest growing aviation markets in the world and with Air China (BEJ) and Shanghai Airlines (SHA) now formally Star Alliance (SAL) member airlines, we offer an unrivalled network of flight connections to, from, and within this market for international travelers," Star (SAL) CEO, Jaan Albrecht said. In order to provide better interconnectivity between international flights and domestic destinations in China, (BEJ), (SHA) and other members, serving China are working on cementing a dual-hub strategy at Beijing and Shanghai Pudong.

Domestic China market share is shown on ATTACHED - "BEJ-DOM-MKT-SHARE-DEC07."

737-86N (35222, B-5329), (GEF) leased, 737-89L (36485, B-5343), 2 A321-211s (3307, B-6327; 3329, B-6326), and A330-243 (884, B-6093), deliveries.

January 2008: 2007 statistics: 66.98 billion (RPK)s passenger traffic (+11.1%); +7.3% capacity (ASK)s; +2.6 load factor, for 78.6% LF. SEE ATTACHED COMPARISON CHART TO SELECTED OPERATORS - "BEJ-2007-STATS."

Air China (BEJ) parent, China National Aviation Holding Co (CNAC) said that China Eastern Airlines (CEA) needs to renew discussions with Singapore Airlines (SIA) on the high-profile stake sale, arguing that the HK$3.80 price set for each of the additional shares tailored for (SIA) is inadequate. It was the second such statement from (CNAC), which said on December 26, that it never promised not to vote to veto the deal at a shareholders' conference scheduled for January 8. (CNAC) currently is (CEA)'s largest circulation shareholder with 12.07%.

(CEA) President, Li Fenghua admitted that the carrier is facing significant pressure from (BEJ), which he called a "troublemaker." But he insisted that the deal has been sealed and that the share price will not change. (BEJ) has said it is interested in partnering with (CEA) through a cross shareholding as well as establishment of a cargo joint venture. But CEA, Managing Director, Cao Jianxiong rejected the possibility, saying the carrier would rather cooperate with (SIA). "So far, China's big three airlines' (RASK) on long-haul routes is around CNY0.30, while this figure for (SIA) has reached between CNY0.60 and CNY0.70," he explained. "So (SIA) is a better cooperative partner to improve (CEA)'s management level in the long run, especially in long-haul operations, that account for one-third of (CEA)'s total operating revenue."

(BEJ) President, Li Jiaxiang was promoted to (CAAC) (CAC) Minister on December 28, which industry analysts have said could have an impact on the (CEA)/(SIA) deal.

The China Eastern Airlines (CEA)/Singapore Airlines (SIA) deal appears increasingly less likely to go through, with Air China (BEJ) stating that it is planning a counterbid, while a change in (CAAC) (CAC) leadership signaled that Beijing may be cooling to the stake sale. Li Jiaxiang, President of Air China (BEJ) parent, China National Aviation Holding Co, was promoted to head China's aviation ministry on December 28, and is known to be skeptical about foreign investment in Chinese airlines. (CEA) Chairman, Li Fenghua said last month, that (SIA)/parent Temasek's 24% stake purchase would not be blocked by minority shareholder (BEJ), which holds approximately 12% of (CEA), because the government supported the deal and would direct (BEJ) to approve it. But Li Jiaxiang's appointment to lead the (CAAC) (CAC) appears to have emboldened (CNAC), which in recent days has said (SIA)/Temasek is paying too little for the stake, and that negotiations between (CEA) and the Singaporeans (SIA) should be restarted. It has stated that it has not made any promises regarding the (CEA) shareholders' vote to be scheduled soon, and announced plans to offer its own bid for the 24% stake, if shareholders block the (SIA) deal. It added that it would vote against the (SIA) stake purchase unless the sale price, currently at HK$3.80/$0.49 per share, is "improved." Whereas shareholders may have been wary about voting against the stake sale to (SIA) because, as Li Fenghua suggested, it was Beijing's wish that it be approved, Li Jiaxiang's stance against foreign investment, and being in favor of building up China's airline industry internally, may reverse that calculation. (CNAC) denied that it has been given any direction by Beijing, and told various media outlets that it believed the government would allow (CEA) shareholders to make their own decisions. Interestingly, the official news agency of the Chinese government, "Xinhua," reported that the (CEA)/(SIA) deal "was left in uncertainty" and noted that (CNAC) has said it does "not reflect the fair value of" (CEA). According to "Xinhua," "Analysts said [CNAC's] statement, coupled with the promotion of Li Jiaxiang . . . added uncertainty to the share placement of China Eastern (CEA). Li has sought to build Air China (BEJ) into a 'super carrier' by restructuring domestic airlines, a move thought to be necessary, to compete with foreign competitors for larger market shares."

China Eastern Airlines (CEA) Chairman, Li Fenghua insisted that the carrier's plan to sell a 25% stake to Singapore Airlines (SIA) and its parent Temasek was not dead even after more than >77% of (CEA)'s minority shareholders voted against the deal, effectively killing it.
Li also vowed to continue to oppose efforts by Air China (BEJ) to take a similarly sized stake, declaring that (CEA) would not be swayed by a richer marriage proposal from (BEJ) and parent China National Aviation Holding Co (CNAC). "It's not simply the price that I look at. It's like if you don't like her, no matter how big the dowry is, it wouldn't work," he said. (CNAC), which led the opposition to the Singapore (SIA) investment, and Cathay Pacific Airways (CAT) said they now will join together to bid on the stake in (CEA), which has a highly desirable hub in Shanghai. (CNAC), which holds about 12% of (CEA), made it clear in the weeks leading up to the shareholder vote, that it would move to block the sale because (SIA)/Temasek's HK$3.80/$0.49 per share offer was too low. (CNAC) said before the vote that it planned to offer HK$5 per share for no more than a 30% stake, if the (SIA) deal was vetoed. But Li told reporters, "We won't give up our deal with (SIA), as it is the best cooperative partner for us. . .We are aware that it's a long-term process to [convince] minority shareholders [to back the sale], but we will keep working on it." He added that another shareholder conference will take place in three months, and a vote will be taken again.

(SIA) said it will continue to pursue the stake purchase. "Singapore Airlines (SIA) is disappointed that the proposed transaction involving an equity stake in China Eastern Airlines (CEA) did not receive the required level of support from independent shareholders," it said in a statement. It added that it "will continue to support the building of a relationship with China Eastern (CEA)" and pointed to the fact that (CEA) and (SIA) are "mutually willing" to enter into a partnership. (SIA) reiterated that its offer represented "full and fair value."

Air China (BEJ) parent, China National Aviation Holding Co (CNAC) is preparing its own bid for China Eastern Airlines (CEA) following the recent rejection of the latter's stake sale deal with Singapore Airlines (SIA), but is doing so with an eye toward cooperation rather than acquisition. "Our new bid will be mainly focused on how to better implement a Shanghai hub strategy and achieve synergy with (CEA), which will possibly include a cross shareholding as well as the establishment of a cargo joint venture," a (CNAC) insider said. Beijing-based (BEJ) currently commands 12% of the Shanghai market against China Eastern (CEA)'s 35%. The source also stated that Cathay Pacific Airways (CAT) will join (CNAC) in its bid, while stressing that Air China (BEJ)'s interest in its rival is limited to strategic cooperation and that a merger is not in the offing.

According to a (CNAC) statement released over the weekend, it intends to purchase a no-more-than-30% stake in China Eastern (CEA) for at least HK$5/$0.64 per share, significantly higher than the HK$3.80 offered by (SIA). (CNAC) spokesperson, Chu Chengping confirmed that the company will keep its word and submit its bid to the (CEA) board within two weeks. (CEA) Board Secretary, Luo Zhuping said that the carrier "is waiting for (CNAC) to propose their bid," adding that (CEA) has not discussed a revised deal with (SIA). (CEA) Chairman, Li Fenghua continued to insist the (SIA) deal will be presented to shareholders again and that he has no interest in working with (CNAC). "We have chosen Singapore Airlines (SIA) as our strategic investor, and not just because of their cash injection. More importantly we hope to improve our overall management level," Li emphasized. (CEA)'s minority shareholders passed a proposal nominating (SIA) Chairman, Stephen Lee and CEO, Chew Choon Seng to the (CEA) board, which industry analysts noted demonstrates that shareholders agree (SIA) can enhance (CEA)'s management expertise. Those placements will not take effect because the stake sale deal was vetoed.

Merrill Lynch Securities said China Eastern (CEA) "possibly will explore other possibilities of conducting cooperation with (SIA) and won't submit (CNAC)'s bid to its minority shareholders for approval unless the State-owned Assets Supervision and Administration Commission of the State Council, the biggest state stakeholders of (BEJ) and (CEA), exerts pressure on (CEA) to do so." It added that "(SIA) may not raise its per-share price for (CEA) but possibly will reduce its proposed stake."

Later, Air China (BEJ) parent, China National Aviation Holding Co (CNAC) submitted its formal bid to China Eastern Airlines (CEA), it announced, saying it intends to purchase 2.9 billion "H" shares in (CEA) for at least HK$5 per share and raise its stake to 26.14% from the current 12.07%. According to China International Capital Corp, (CNAC)'s financial adviser, (CEA) will earn HK$14.9 billion from the offer, and reduce its debt ratio from the current 94.3% to 77%. The deal would increase (CEA)'s annual revenue by HK$4.31 billion and cut annual costs by HK$1.08 billion. (CNAC) said it will cooperate with China Eastern (CEA), especially in Shanghai, and that the carriers will launch a cargo joint venture.

But China Eastern (CEA) expressed doubt about the offer, saying "it is informal and does not conform to legal procedures." (CEA) has said it will not accept any offer without the involvement of Singapore Airlines (SIA), which it claimed is its ideal cooperative partner. (SIA) spokesperson, Stephen Forsaw stated recently that (SIA) will be "very patient to develop relations with (CEA) on the terms both carriers agreed." He reiterated that (SIA) will not get into a "price war" with Air China (BEJ) for (CEA).

Guosen Securities said (CNAC)'s offer would result in better synergies for China Eastern (CEA) than its deal with Singapore Airlines (SIA), which was rejected by (CEA) shareholders. But "due to (CEA)'s continuous resistance and its November agreement signed with (SIA) that the carriers are not allowed to sign stake purchase agreements with other investors until August 9, (CEA) will not reach an agreement with (CNAC) in the short term," Guosen said. Industry analysts noted that (BEJ)'s proposed alliance with (CEA) will pose a potential threat to China Southern Airlines (GUN), which is based in Guangzhou. (GUN) said that it will continue to keep a close watch on (CEA) and "will react properly to any changes in China's domestic airline industry."

Later again, while attempting to hold off Air China (BEJ)'s drive to replace Singapore Airlines (SIA) as a strategic partner and purchase its own sizeable stake, China Eastern Airlines (CEA) found a domestic ally in China Southern Airlines (GUN), with whom it signed a cooperation agreement in Shanghai. The accord outlines a partnership that includes airplane purchasing, ground handling services, marketing and sales, network synergies, loyalty programs and other elements, but does not reference the attempted stake sale to (SIA), nor (BEJ)'s counteroffer. "Our domestic route network is complementary with (CEA)'s, as ours is mainly concentrated in the south, while (CEA) has a broad route network in the east," (GUN) Chairman, Liu Shaoyong said. (CEA) Chairman, Li Fenghua said, "This cooperation can lower both carriers' operating cost and provide better service to passengers." Liu also noted that (GUN) wants to recommend (CEA) as a future member of SkyTeam (STM), which China Southern (GUN) joined two months ago. Industry analysts saw the agreement as a sign that (CEA) and (GUN) intend to compete against Air China (BEJ), rather than cooperate or cede to its apparent "supercarrier" ambitions. "(CEA) has sent a very clear message to (BEJ) that the latter is not its cooperative partner and (CEA) can cooperate with other domestic carriers besides Air China (BEJ)," China Securities Co aviation analyst, Li Lei said. Industrial Securities analyst, Xia Fulu agreed, saying, "If (BEJ) successfully won its (CEA) bid, and gains more control over the latter, then its next target will be China Southern (GUN) . . . That's why (CEA) and (GUN) have vowed to deepen their cooperation now, in order to boost their own growth as they don't want to be merged into (BEJ) in the future."

Air China (BEJ) plans to raise its stake in Air China Cargo (CAO) to 76% from 51%, in order to pave the way for its joint venture with Cathay Pacific Airways (CAT). According to a (BEJ) statement, it will acquire the share through the purchase of Gold Leaf Enterprise Holdings' stake in Air China Cargo (CAO) shareholder Langxing Co. Beijing Capital Airport holds the remaining 24%, and is in negotiations with (BEJ) about a sale, that would make the country's largest cargo carrier the flag carrier's wholly owned subsidiary. "So far, 70% of (BEJ)'s cargo business comes from passenger airplane's belly freight, and the scattered shareholding structure of Air China Cargo (CAO) doesn't do any good to our cargo business in the long run," (BEJ) Board Secretary, Huang Bin explained. He also noted that (BEJ) is advancing talks with Cathay (CAT) regarding when and how to launch the cargo Joint Venture (JV).

Air China Cargo (CAO) currently operates four 747-200F freighters and eight 747-400 combis. It also markets the belly space on 60 (BEJ) passenger airplanes. It posted a net loss of -CNY300 million/-$41.1 million in the first six months of 2007, but began to make a turnaround in August. It is expected to earn a profit in 2008.

A330-243 (890, B-6113), delivery.

February 2008: Air China (BEJ) said it will move into Beijing Capital Airport's new Terminal 3 next month. The 1-million-sq-m project includes a 3,800-m runway and will help the airport double passenger capacity by 2015.

China Eastern Airlines (CEA) continues to press on in its effort to reach a deal with Singapore Airlines (SIA) and plans to cooperate with (SIA) parent, Temasek to fashion terms that will be acceptable to minority shareholders, who vetoed the sale of a 24% stake last month. (CEA) is preparing for the second minority shareholders conference even though it has yet to reach a revised deal with (SIA)/Temasek. The latter recently confirmed that it will work with (CEA) to win over minority shareholders. (SIA) repeatedly had said it would not raise its offer.

Meantime, the Shanghai-based carrier noted that it has made no progress with Air China (BEJ) parent, (CNAC), which presented its own offer for (CEA), that trumped (SIA)'s. Cathay Pacific Airways (CAT), a close ally of (BEJ), offered its support to the bid earlier this week. According to the "Financial Times," (CAT) CEO, Tony Tyler said his airline wanted to avoid any dilution of its 17.5% cross-shareholding with Air China (BEJ), which would occur "if they were to issue a load of shares in order to buy China Eastern (CEA) or a big chunk of (CEA)." He also said that better management would have little difficulty in turning (CEA) around.

Later, Cathay Pacific Airways (CAT) raised its stake in Air China (BEJ) from 17.5% to more than >18% through the February 6 purchase of 15 million "H" shares, according to a statement released by the Hong Kong Stock Exchange last week. (BEJ) Board Secretary, Huang Bin noted that Cathay (CAT) may want to avoid any dilution of its cross-shareholding in (BEJ), as the latter plans to circulate 400 million additional "A" shares to raise funds for the acquisition of 54 airplanes. That purchase is awaiting approval from the China Securities Regulatory Commission. Cathay (CAT)'s holding in (BEJ) cannot exceed >20% under the terms of the agreement between the carriers. Huang ruled out the possibility that (CAT)'s purchase is related to (BEJ)'s bid for China Eastern Airlines (CEA), but (CAT) CEO , Tony Tyler said that his airline will help fund (BEJ)'s effort to beat out Singapore Airlines (SIA) for a strategic stake in (CEA). Industry analysts speculated that the share purchase has more of a symbolic significance to (CAT), as it bought the stock on the market rather than directly from (BEJ), which did not benefit financially from the transaction. However, by raising its stake in (BEJ), (CAT) sent a signal that it will stand by its promise to help the carrier in its bid for (CEA).

The third runway at Beijing Capital International Airport (PEK) has been put into operation following a successful flight test acceptance of a new CAT III Instrument Landing System (ILS) *1 provided by Thales (THL). (PEK) is the busiest airport in China, with more than >48 million passengers transported in 2006 and an average of 1,100 landings/departures per day. The previous two-runway operation mode would not have been able to meet the requirements of increased traffic expected for the 2008 Olympic Games. The new runway, designed also to serve the A380, is now fully equipped for CAT III *2 landing requirements, and represents the highest international precision landing standard to help support the expected +30% traffic volume increase. The Thales (THL) CAT 111 (ILS) is capable of safely guiding airplanes on automatic precision landing in very low visibility conditions (down to 200 meters horizontal visibility). Thales (THL) has more than >300 Navigation systems installed in recent years, to help to safely support the dramatic air traffic growth in the country.

Air China (BEJ) intends to make Air China Cargo (CAO) its wholly owned subsidiary and is negotiating with Beijing Capital Airport to purchase the latter's 24% stake in the country's largest cargo carrier. "We did talk with Beijing Capital Airport about the purchase of their shares in the Air China Cargo (CAO) carrier, but so far, no substantial progress has been made," (BEJ) Board Secretary, Huang Bin revealed. In December, (BEJ) announced plans to raise its stake in Air China Cargo (CAO) to 76% from 51% through the purchase of Gold Leaf Enterprise Holdings' stake in Air China Cargo (CAO) shareholder Langxing Co.

Beijing-based, Air China Cargo (CAO) has suffered operating losses in recent years and reported a net loss of -CNY382 million/-$53.4 million in the first nine months of 2007. (BEJ) cited "an increase of freighters that resulted in low airplane utilization rates" and "management problems" as the causes. In response, the carrier has sought greater penetration in Shanghai. It floated the possibility of a cargo joint venture with China Eastern Airlines (CEA), when discussing its recent bid for its rival. "China Cargo Airlines (CCK) is one of the most profitable subsidiaries of (CEA). If Air China (BEJ) can cooperate with (CEA) in the cargo business, by reorganizing Air China Cargo (CAO) with China Cargo Airlines (CCK) successfully, it will pave the way for (BEJ) to merge with (CEA)," said an industry source who asked to remain unidentified.

(BEJ) and (CEA) discussed a cooperation between their respective cargo subsidiaries in 2006, but a potential 50/50 joint venture was scuttled by a bribery case involving (CEA). Air China (BEJ) also is discussing the launch of a Shanghai-based cargo airline with Cathay Pacific Airways (CAT).

Honeywell (SGC) will provide integrated service and repair on Air China (BEJ)'s 180 737, 747, 767, A320, and A340 airplanes, as well as future deliveries. The five-year contract covers the main engine starter.

A330-243 (903, B-6117), delivery.

March 2008: Driven by a growing domestic economy and the appreciation of the yuan, Air China (BEJ) and Air Macau (MCU) parent, Air China Ltd posted a net profit of +CNY4.23 billion/+$595.5 million in 2007, up +57.3% over the +CNY 2.69 billion reported in 2006, on a +14.2% lift in operating revenue to CNY 51.33 billion. In addition to a "handsome investment return," the company credited "improved operating efficiency" and growing passenger numbers for the result. Operating expenses rose +12% year-over-year to CNY47.5 billion with jet fuel accounting for 36%, although those costs were offset partially by hedging that helped reduce expenses by CNY236 million.

(BEJ) added five new international routes during the year, as well as a handful of domestic services. It expanded its fleet from 191 airplanes to 220, excluding Air Macau (MCU). Passenger boardings increased +10.6% to 34.8 million, boosting related revenue +16% to CNY43.6 billion. Traffic climbed +11.1% to 67 billion, and load factor improved +2.7 points to 78.6% LF.

"Looking into 2008, Air China (BEJ) is well positioned to capture the tremendous opportunities presented by the coming Olympic Games and the continued rapid economic growth in China," Acting Chairman, Kong Dong said. He also noted that (BEJ) will aim to continue to improve its service quality as it endeavors to both enhance its profit mix and tighten costs through 2008 and beyond. Hong Kong-based broker (CLSA) forecast that (BEJ) will boost net earnings to +CNY5.89 billion in 2008 and to +CNY6.91 billion in 2009, owing to a "tourism boom generated by the Beijing Olympic Games."

Kong also told reporters that (BEJ) will maintain its bid to purchase 2.9 billion China Eastern Airlines (CEA) "H" shares for at least HK$5/$0.64 per share, despite a recent slump in share price. "(BEJ) is optimistic about (CEA)'s future in Shanghai and hopes to cooperate with the Shanghai-based carrier to achieve the goal of building Shanghai as our gateway," he said.

Air China (BEJ) Acting Chairman, Kong Dong said that (BEJ) plans to introduce Cathay Pacific Airways (CAT) as its partner in its bid for China Eastern Airlines (CEA) to help improve (CEA)'s management if the Shanghai-based carrier reverses its decision and accepts Air China (BEJ)'s offer. (CEA) formally rejected Air China (BEJ)'s bid last month, but (BEJ) parent, China National Aviation Holding Co urged the airline to reconsider again. Kong admitted that Singapore Airlines (SIA), (CEA)'s preferred cooperative partner, is among the world's best carriers but said, "Cathay Pacific (CAT) also possesses many advantages." (CEA) financial adviser Shenyin & Wanguo Securities Co said last month that (BEJ)'s bid would not enable (CEA) to import the foreign expertise that could advance its management and upgrade its operations and profitability. (CAT) Chairman, Christopher Pratt commented that the Hong Kong-based carrier will support (BEJ)'s bid for (CEA), but warned that "the result won't come out soon." Meantime, Kong revealed that (BEJ) will not propose a new bid despite (CEA)'s rejection, but will elaborate on its current offer if (CEA) is willing to accept it. He also said that the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, the controlling stakeholder of China's state-owned airlines, will not interfere with (BEJ)'s bid. (SASAC) Vice Minister, Wang Ruixiang said that the Chinese government will facilitate dialog between state-owned airlines, but "it won't force them to merge if they hold different views on it."

Air China (BEJ) is eyeing Shanghai Airlines (SAL) and plans to deepen cooperation with its Star Alliance (SAL) partner following the formal rejection of its bid for Shanghai-based China Eastern Airlines (CEA) last month. Sun Yu, (BEJ)'s head of planning, revealed that the carrier keeps "close contact" with (SHA) and plans to expand their collaboration. "But whether we can reach an agreement with (SHA) is up to the Shanghai municipal government," the airline's controlling stakeholder. Sun said (BEJ) has started talks with authorities but did not reveal the extent or aim of the negotiations. It has been speculated that (BEJ) may make an outright bid for (SHA) as the Beijing-based carrier's acting chairman, Kong Dong, noted earlier that (BEJ) is committed to enhancing its market position in Shanghai and would look for another domestic partner if (CEA) rejected its advances. But (SHA) Board Secretary, Xu Junmin rejected that possibility and said it will "go its own way" for the time being.
In response, (BEJ) Board Secretary, Huang Bin said, "As member airlines of Star Alliance (SAL), (BEJ) and (SHA) can deepen cooperation in many respects, such as Maintenance Repair & Overhaul (MRO) and airplane purchasing. But as far as I am concerned, it doesn't [necessarily] involve a stake purchase." He added, "Shanghai is an indispensably important hub for Air China (BEJ)" and said 80% of its international routes start there. As part of (BEJ)'s "Shanghai strategy," Sun said it will launch a branch company there soon. It held a 12% market share with 31 airplanes at the close of 2007, while (CEA) and (SHA) accounted for 35% and 15% respectively.

Air China (BEJ) will launch four-times-weekly, Shanghai - Milan Malpensa on March 30, aboard an A340. Air China (BEJ) will launch four-times-weekly, Shanghai - Milan Malpensa on March 30, aboard an A340. Air China (BEJ) has revived plans to serve the North Korean capital, Pyongyang. The official "Xinhua" news agency says Star Alliance (SAL) member Air China (BEJ) will launch thrice-weekly services to the North Korean capital on 31 March. 737s will be used for the flights from its Beijing base. Air China (BEJ) said in November that it planned to start serving Pyongyang in January , but it later delayed the start, citing operational reasons. The state-owned carrier will be the only foreign airline serving the reclusive state of North Korea.

Beijing Capital International Airport's new $3 billion-plus Terminal 3 opened as Shandong Airlines (SHG) (flight SC1151 arrived from Jinan at 8:39 am. UK architect, Norman Foster claimed it is the largest covered structure ever built - - 3.25 km long and 1.3 million sq m of floor space. Construction began in March 2004. The airport said the three-concourse facility welcomed Shandong (SHG), Sichuan Airlines (SIC), Qantas (QAN), Qatar Airways (QTA), British Airways (BAB), and El Al (ELA). A second move is scheduled for March 26 when Air China (BEJ), Shanghai Airlines (SHA), (SAS), Austrian Airlines (AUL), Lufthansa (DLH), Asiana Airlines (AAR), Air Canada (ACN), United Airlines (UAL), (ANA), Thai Airways (TII), Singapore Airlines (SIA), Finnair (FIN), Cathay Pacific Airways (CAT), Japan Airlines (JAL), Dragonair (DRG), Turkish Airlines (THY), Emirates (EAD), Air Macau (MCU), S7 Airlines (SBR), and EgyptAir (EGP) will transfer to the new building. "Reuters" reported that airport capacity will be boosted to 76 million per year from the 52 million it served in 2007. The baggage system can handle 19,800 pieces per hour, it said.

Hainan Airlines (HNA) is in crisis following the appeal of six pilots (FC) to the Haikou arbitration committee to have their labor contracts terminated. The six resigned at the end of last year, bringing to 20 the number of (HNA) pilots (FC) who have walked out since 2006. The carrier has accepted none of the resignations and their disputes remain unresolved. Luo Zulin, one of the six who asked for arbitration, said the resignations were a result of "frequent overtime" and "long delays in getting their salary." (HNA) is insisting on the validity the contracts and denied Luo's accusation regarding pay. It said that if the committee ruled in the pilots (FC)'s favor, it would request several million yuan in compensation from them and the return of their licenses.

Air China (BEJ), China Eastern Airlines (CEA), Xiamen Airlines (XIA), and Xinhua Airlines (XIH) also have faced labor disputes with resigned pilots (FC), largely because Chinese carriers traditionally cover training expenses that can amount to millions of yuan per pilot (FC). There is considerable reluctance to allow them to transfer to competing carriers.

Under a Pilots Flow Management Proposal policy implemented by (CAAC) (CAC) in 2005, "the potential new employer" of these resigned pilots (FC) must attain the permission of the "old employer" before hiring, then pay compensation of CNY700,000 to CNY2.1 million/$98,300 to $294,800. According to (CAAC) (cac) statistics, China's commercial aviation fleet numbered 1,099 airplanes last September 30 and is expected to rise to 1,250 by 2010, leading to an estimated shortfall of -200 pilots (FC) annually.

In order to make up the severe shortage, carriers are beginning to follow the internationally common practice of recruiting privately trained pilots (FC). China Southern Airlines (GUN) started the trend last May, announcing its plans to recruit 100 such pilots (FC). Sichuan Airlines (SIC) followed three months later, hiring 50 private pilots (FC). Spring Airlines (CQH), East Star Airlines (ESR), and United Eagle Airlines (UEG) have disclosed their interest in recruiting such pilots (FC).

Air China is eyeing Shanghai Airlines and plans to deepen cooperation with its Star Alliance partner following the formal rejection of its bid for Shanghai-based China Eastern Airlines last month. Sun Yu, CA's head of planning, revealed that the carrier keeps "close contact" with SAL and plans to expand their collaboration. "But whether we can reach an agreement with SAL is up to the Shanghai municipal government," the airline's controlling stakeholder. Sun said CA has started talks with authorities but did not reveal the extent or aim of the negotiations.

It has been speculated that CA may make an outright bid for SAL, as the Beijing-based carrier's acting chairman, Kong Dong, noted earlier that CA is committed to enhancing its market position in Shanghai and would look for another domestic partner if CEA rejected its advances (ATWOnline, March 10). But SAL Board Secretary Xu Junmin rejected that possibility yesterday and said it will "go its own way" for the time being.

In response, CA Board Secretary Huang Bin said, "As member airlines of Star Alliance, CA and SAL can deepen cooperation in many respects, such as MRO and aircraft purchasing. But as far as I am concerned, it doesn't [necessarily] involve a stake purchase." He added, "Shanghai is an indispensably important hub for Air China" and said 80% of its international routes start there. As part of CA's "Shanghai strategy," Sun said it will launch a branch company there soon. It held a 12% market share with 31 aircraft at the close of 2007 while CEA and SAL accounted for 35% and 15% respectively.

Star Alliance (SAL) carriers Air Canada (ACN), Air China (BEJ), (ANA), Asiana Airlines (AAR), Austrian Airlines (AUL), (LOT) Polish Airlines, Lufthansa (DLH), (SAS) Scandinavian Airlines, Shanghai Airlines (SAL), Singapore Airlines (SIA), Thai Airways (TII), Turkish Airlines (THY), and United Airlines (UAL) each completed the transfer of their operations to Beijing International's Terminal 3. The move was part of the collocation plan developed as a result of Air China (BEJ) and Shanghai Airlines (SAL) joining the alliance last year. A similar collocation will be completed at Shanghai Pudong on April 29.

A330-243 (909, B-6115), delivery, ex-(F-WWYG).

April 2008: Air China (BEJ) posted a net profit of +CNY1.04 billion/+$149.2 million in the first quarter, up +147% from the +CNY422.7 million earned in the year-ago quarter, on a +21% lift in operating revenue to CNY12.76 billion. Operating expenses jumped +15.43% to CNY12.04 billion. In addition to "stable growth in domestic demand," (BEJ) credited capacity increases and "accelerated" yuan appreciation for the improved result. It released no other details. The strengthening of the Chinese currency now is a routinely cited profit driver. It appreciated +4.5% in the first quarter and has boosted domestic bottom lines as Chinese carriers purchase airplanes and parts in USA dollars.

The Chinese government named Kong Dong as state-owned, Air China (BEJ)'s new Chairman. He has been acting Chairman since predecessor Li Jiaxiang was appointed the (CAAC) (CAC) minister in December.

(BEJ) launched thrice-weekly, Beijing - Pyongyang, aboard a 737.

SITA announced completion of 700 workstations at Beijing Capital's Terminal 3 to support Olympic Games traffic this summer, including check-in, boarding and transfers. A $3 billion addition, the terminal is expected to boost annual capacity by 30 million passengers. SITA projects that 50 of its self-service check-in kiosks will be ready to go live for the Olympics.

Chinese mainland carriers are preparing for commercial flights across the Taiwan Strait to be permitted before year end, as the newly elected President of Taiwan, Ma Yingjiu, has promised. Ma will take office on May 20, and said he plans to allow the launch of weekend charter flights across the strait in July, followed by daily scheduled flights before 2009.

According to China International Capital Corp (CICC), mainland carriers see "big market potential" across the strait. The route is expected to contribute more than CNY5 billion/CNY714.2 million to the collective annual net profit of mainland airlines.

News reports out of Taiwan said that Air China (BEJ) plans to take the lead and establish a branch office on the island after Ma assumes the presidency. (BEJ) did not confirm, but did stated that "all mainland carriers are preparing for launching the cross-strait flights."

(CICC) noted that China Eastern Airlines (CEA) will benefit most from the flights as 35% of the Taiwanese population living on the Chinese mainline resides in Shanghai and the neighboring Jiangsu Province. China Southern Airlines (GUN) should reap more benefits than (BEJ) as well, according to (CICC), as it holds a 60% stake in Xiamen Airlines (XIA). A quarter of the mainland's Taiwanese population lives in the Pearl River Delta region and another 10% in nearby Fujian Province.

Air China (BEJ) holds a 17.5% stake in Cathay Pacific Airways (CAT) and a 51% stake in Air Macau (MCU). Those two carriers will be impacted by the liberalization, especially (CAT), which connects Taiwan to both the mainland and Europe through Hong Kong.

737-89L (36486, B-5390) and A321-213 (3523, B-6361), deliveries.

June 2008: Chinese airlines carried 15.4 million passengers in May, down -1.1% year-over-year, as the devastating Sichuan Province earthquake and surging oil prices impacted demand, according to the (CAAC) (CAC). Air China (BEJ) passenger boardings dropped -10.7% to 2.7 million, and load factor fell -4.5 points to 71.3% LF, which (BEJ) attributed to the earthquake and the dedication of some capacity to relief efforts. China Eastern Airlines (CEA) saw passenger numbers plunge -8% to 3 million. Operating expenses rose with fuel prices. (BEJ) noted that it purchased 244,000 tonnes of jet fuel in May with the average price per tonne rising +31% to CNY7,447/$1,081. Airlines collectively cut their schedules and raised fares, leading to a -2.8-point decline in overall load factor to 70.9% LF, and a -7.2% fall in average utilization to 9 hours. The total fleet numbered 1,181 airplanes at the end of May, an increase of +13 during the month.

China's airlines are moving to upgrade their fleets and cut international flights to mitigate the impact of skyrocketing fuel costs. Air China (BEJ) is expected to replace older 747s with more fuel-efficient A330s. (BEJ) VP, Ma Xulun added that the company plans to increase hedging and optimize routes to reduce fuel expense. "Last year, our fuel hedge accounted for 50% of our fuel consumption," he explained. "This year we purchased our international fuel almost all by fuel hedge." In addition to these measures, Chinese carriers have raised fuel surcharges on international routes, including a +33% increase by China Southern Airlines (GUN).

US Airways (AMW)/(USA) and Air China (BEJ) signed a codeshare agreement that will put the (AMW)/(USA) code on (BEJ) flights to Beijing from Los Angeles (LAX), San Francisco (SFO), and New York (JFK), plus some connecting flights to Shanghai, while (BEJ) will put its code on (AMW)/(USA) service from (LAX) and (SFO) to Phoenix, Las Vegas, Charlotte, Philadelphia, and Pittsburgh.

Airlines are concluding preparations for the launch of commercial charter flights across the Taiwan Strait, which are expected to start July 4, after an agreement between the Strait Exchange Foundation (Taipei) and the Association for Relations Across the Taiwan Strait (Beijing) was signed in Beijing. The deal allows for 18 direct flights across the strait each weekend (including Fridays). Taiwan will have access to Beijing, Shanghai, Guangzhou, Xiamen, and Nanjing, with future flights to Chengdu, Chongqing, Hangzhou, Dalian, Guilin, and Shenzhen under consideration. In turn, mainland Chinese carriers will be able to fly to Kaohsiung, Taipei, Taichung, Matsuyama, Penghu, Hualien, Kinmen, and Taitung. The agreement calls for negotiations on regularly scheduled direct flights to start "as soon as possible." Both parties agreed to discuss cargo charters in the next three months.

Passengers currently traveling between the Chinese mainland and Taiwan must transfer in Hong Kong, which typically adds 4 to 5 hoursd to the trip. The cross-strait flights also will help reduce operating costs and expand markets, which is important especially for struggling Taiwanese airlines suffering from fuel price hikes and fierce competition from high-speed rail.

Air China (BEJ) VP Zhang Lan said that the Beijing-based carrier will operate five airplanes to Taiwan. (BEJ) noted that "everything is ready now" and it planned to send a delegation to Taipei to conduct operational integration with China Airlines (CHI) and (EVA) Air.

China Eastern Airlines (CEA) plans to establish offices in Taipei and Kaohsiung. The Shanghai-based carrier sent a delegation led by Managing Director, Cao Jianxiong to Taiwan to discuss ground handling, Maintenance Repair & Overhaul (MRO), and other operational necessities.

China Southern Airlines (GUN) announced that it will sign a strategic agreement with (CHI) on June 23 to address both carriers' full-scale cooperation on cross-strait flights. (GUN) said it has concluded all its preparations.

The Chinese government raised the domestic fuel price more than +25% to CNY7,450/$1,082 per ton, which China Securities aviation analyst Li Lei reported would lead to a +CNY3.6 billion increase in annual expenses for China Southern Airlines (GUN) - - which operates the largest domestic network - - a +CNY1.8 billion rise for Air China (BEJ), +CNY2.2 billion for China Eastern Airlines (CEA), and +CNY700 million for Hainan Airlines (HNA). However, Li said the increase will not have a significant influence on second-quarter financial performance, as yuan appreciation will continue to drive profits. However, he said the second-half outlook is "less optimistic," owing to fuel costs and "declining" domestic demand. Airlines plan to follow their fuel surcharge increase on international routes with a domestic increase. (GUN) Chairman, Liu Shaoyong said that (GUN), (BEJ) and (CEA) applied for the right to boost domestic charges by +33.3% to CNY80 on routes shorter than 800 km and by +50% to CNY150 on longer flights.

Air China (BEJ) said it will purchase 20 A330s valued at $3.82 billion, according to a statement obtained by several news services that the carrier issued to the Hong Kong Stock Exchange. (BEJ) said the airplanes will boost its capacity by +16.5% and allow it to increase flight frequencies from Beijing, according to "Bloomberg." The airline will use cash, bank loans and debt instruments, to pay for the airplanes.

July 2008: Air China (BEJ) also experienced weaker demand in June owing to the Sichuan earthquake and heightened security measures ahead of the Olympics (next month). Passenger boardings dropped -7.5% to 2.7 million, and load factor fell -5 points to 72.5% LF.

The first weekend of charter flights across the Taiwan Strait concluded with 11 carriers having offered services, which many regard as an important step toward the opening of scheduled flights between the Chinese mainland and Taiwan. The 11 airlines are Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA), Hainan Airlines (HNA), Shanghai Airlines (SHA), Xiamen Airlines (XIA), China Airlines (CHI), Mandarin Airlines (MDN), TransAsia Airways (FSH), Uni Air (MAK), and (EVA) Air.

Taiwanese aviation authorities reported that six airports handled 72 flights transporting 12,000 passengers July 4 through 7. Taipei Taoyuan handled 32 flights, followed by Taipei Songshan with 26. Makung (six), Kaohsiung (four), Taichung (two), and Hualien (two) handled the remainder. Corresponding statistics for the mainland were unavailable, but the (CAAC) (CAC) noted that there will be 144 roundtrip flights across the strait this month. Mainland carriers expect the flights to provide a new growth point as they have experienced slowing increases in demand, especially in May, when passenger volume dipped 1.1% year-over-year, the first decrease since 2003.

(GUN) Chairman Liu Shaoyong, who was aboard the inaugural A330 flight to Taipei, called the current allowance "too little" and said that "daily regular direct flights [without having to overfly Hong Kong] should be realized as soon as possible."

China Airlines (CHI)'s former Chairman, Zhao Guoshuai, who resigned this week, agreed with Liu. He argued that "it is far from enough to operate only 72 charter flights every weekend." He expressed confidence that the flights "will exert a positive effect on China Airlines (CHI)" as the mainland is a new market for the Taipei-based carrier.

Meantime, (CEA) already has established an office in Taipei. According to Managing Director, Cao Jianxiong, the Shanghai-based carrier plans to recruit staff and cabin crew in Taiwan in the future while (CHI) and (EVA) act as agents for ticket sales.

Chinese carriers were dealt another blow to their bottom lines this month as authorities decided to raise the jet fuel price by +CNY720/+ $104.83 per ton.

Air China (BEJ) Board Secretary, Huang Bin confirmed that the increase took effect on July 1. It is the third time fuel prices have gone up this year following a +CNY210 per ton increase in the first quarter and a +CNY1,500 hike on June 20. China's quarterly adjustment of jet fuel prices traditionally takes import costs into consideration, which largely has shielded airlines from the soaring international oil prices over the past two years.

CITIC Securities Company aviation analyst, Ma Xiaoli said he expects China Southern Airlines (GUN) will be hit hardest by the domestic increase as it flies the largest number of domestic routes. According to his estimate, (GUN) faces a reduction of -CNY250 million in marginal profit for every +CNY100 increase in the cost of jet fuel, while China Eastern Airlines (CEA)'s bottom line would sink by -CNY220 million and Air China (BEJ)'s would drop by -CNY180 million.

To mitigate rising fuel expenses, Chinese carriers collectively approved an increase in domestic fuel surcharges beginning July 1. In addition, (BEJ), (GUN), Shanghai Airlines (SHA), and Hainan Airlines (HNA) will raise surcharges on international routes.

(CEA) Board Secretary, Luo Zhuping said that while higher surcharges are helpful, "The shrinking market demand is a bigger blow for airlines than the surging fuel price. If fuel surcharges keep on rising, it will impact the market demand to reduce further, which will lead to a drop in airfares."

Huang shares the same view. He said that (BEJ) will be cautious as "the company has to take market tolerance into account." In the meantime, Morgan Stanley analyst, Edward Xu wrote in a research note that Chinese carriers will report poor traffic data for June.

Air Macau (MCU) has become another victim of surging oil prices and is clinging to survival, as it awaits help from parent Air China (BEJ) Group. According to the "China Business News," the Macau carrier posted a net loss in excess of >-MOP200 million/-$24.6 million in the first six months of this year, more than half of its registered capital of MOP400 million. Under Macau law, exceeding that threshold requires the company to either inject new capital or declare bankruptcy. Air China (BEJ) Board Secretary, Huang Bin acknowledged Air Macau (MCU)'s request for help and said (BEJ) will determine a solution with other (MCU) stakeholders, including (TAP) Portugal's SEAP investment fund (15%), casino company Sociedade de Turismo e Diversoes de Macau (14%), the Macau government, and (EVA) Air. (BEJ) holds a 51% stake.

In a company statement cited by the "Macau Daily News," Air Macau (MCU) said it has reached a strategic cooperation agreement with (BEJ) and that aid will be extended soon. Industry analysts are suggesting that the recently inaugurated flights across the Taiwan Strait will join oil prices in impacting (MCU)'s performance, especially when, as expected, regularly scheduled service begins. Currently, 60% its operating revenue is generated by transfers between the Chinese mainland and Taiwan. But Air Macau (MCU) noted in the statement that (BEJ) will support its effort to secure "special routes" from (CAAC) (CAC) after the regular cross-strait flights begin.

In conjunction with its effort to enhance its "Beijing hub" strategy and boost domestic and international frequencies from the capital, the (BEJ) Board approved the purchase of 45 airplanes from Boeing (TBC) at a list price of $6.3 billion. Approval came three weeks after (BEJ) placed an order for 20 Airbus (EDS) airplanes. (BEJ) will buy 30 737-800s and 15 777s, with delivery expected in stages from early 2011 to 2015, (BEJ) said in a statement to the Hong Kong Stock Exchange. The purchase will increase (BEJ)'s fleet capacity by +35%.

Meantime, (BEJ) announced that it will suspend 60 daily flights to/from Beijing during the upcoming Summer Olympics, as Beijing Capital International airport has decided to reduce daily flights by -7% to 1,250, between July 20 and August 31 to make way for charter services carrying athletes.

August 2008: July total passengers were down -7% (year/year), despite China's strong economic growth.

Air China (BEJ)'s first-half net income fell -20.7% to +CNY1.24 billion/+$180.8 million (+$213 million) on surging oil prices and softening traffic resulting from May's Sichuan earthquake and heightened security surrounding the recently completed Olympics. The company reported an operating loss of -CNY336 million, a significant reversal from the +CNY1.37 billion earned in the year-ago semester. The carrier remained in the black thanks to currency gains of +CNY1.92 billion as the stronger yuan reduced the value of its USA dollar-dominated debt.

First-half operating revenue rose +9.8% year-over-year to CNY25.65 billion, while expenses jumped +18.2% to CNY25.98 billion, as fuel costs increased +31.9% to CNY10.61 billion. Passenger boardings declined -1.5% to 17.6 million, and load factor fell -0.8 point to 75.1% LF.

(BEJ) Chairman, Kong Dong cited an unfavorable global operating environment characterized by "oil price increases, an economic slowdown, and weakened consumer confidence," and domestic challenges including the earthquake, a major snowstorm, and surging inflation as culprits in the result. Looking ahead, he predicted that "high oil prices and global economic softness will continue to deeply affect the airline industry for the remaining part of the year" and said (BEJ) may feel the impact beyond 2008. But "the global trend of painful industry consolidation," in addition to the newly inaugurated flights across the Taiwan Strait, will "present opportunities to stronger industry players with a strong operating track record and a solid balance sheet," he concluded.

Airlines on both sides of the Taiwan Strait want to launch weekday services, as weekend charter flights linking the Chinese mainland and Taiwan reach the one-month mark. "Judging from the one-month results, the weekend charter flights are indeed widely welcomed by people on both sides of the strait," (EVA) Air Vice General Manager, Nieh Kuo-wei told Chinese state news agency "Xinhua." Cross-strait charter flights kicked off on July 4 under an agreement signed by the China-based Association for Relations Across the Taiwan Strait and the Taiwan-based Straits Exchange Foundation. According to "Xinhua," there have been 144 roundtrip flights carrying some 53,000 passengers over the last four weekends. The average load factor is reported to be 87% LF.

Chinese carriers continued to suffer falling passenger demand in July. Air China (BEJ)'s (RPK)s traffic decreased by -8.4% from the year-ago month, while passenger boardings fell -6.8% to 3 million, and load factor plunged -8.1 points to 73.3% LF. China Southern Airlines (GUN)'s (RPK)s slid -4.2% year-over-year, and load factor dipped -1.4 points to 75.1% LF. It is noteworthy that (BEJ)'s and (GUN)'s international (RPK)s dropped -13.7% and -13.3%, respectively, mainly owing to heightened security measures related to the Beijing Olympics and slowing global demand. (GUN) cut its international capacity -14.2% (ASK)s last month. Competitors are expected to report similar results. As July traditionally is the peak travel period in China, industry analysts pointed out that the decline in demand will have a significant impact on full-year performance.

737-86N (36810, B-5196), (GEF) leased, and 737-89L (36489, B-5397), A321-213 (3623, B-6362), and A330-243 (944, B-6132), deliveries.

September 2008: Air China (BEJ) and China Southern Airlines (GUN) both endured double-digit year-over-year traffic declines in August, and while some of the drop can be attributed to heightened security related to the Beijing Olympics, slowing domestic economic growth likely portends a poor full-year 2008 traffic and financial performance for Chinese carriers. (BEJ)'s overall passenger traffic plummeted -16.3% year-over-year in August to 5.26 billion (RPK)s on a capacity decrease of -0.9% to 7.4 billion (ASK)s. Its load factor of 71.1% LF was down by -13 points. Passenger boardings dropped -16.6% to 2.77 million, while cargo volume fell -4.1%. Similarly, China Southern (GUN) suffered a sharp decline in August, as passenger boardings plunged -16.2% to 4.99 million, with load factor at 71.2% LF, down -8.7 points from last year and a new low for 2008.

Spring Airlines (CQH) Chairman, Wang Zhenghua said he is optimistic that domestic demand will rebound in September and October, a view that is not widely shared. But even he commented that this month and next provide the only opportunity for carriers to improve their domestic traffic performance this year.

China Eastern Airlines (CEA) has not yet released its traffic statistics for August, but in contrast to Wang, (CEA) Board Secretary Luo Zhuping expressed pessimism regarding the remainder of 2008. "The biggest problem we are facing now is the continuous decline of domestic demand. The winter is coming and uncertain economic prospects make it difficult for domestic demand to rebound in the short term."

Six Hong Kong carriers, including Cathay Pacific Airways (CAT) and Dragonair (DRG), will cut fuel surcharges on international and domestic routes by -10% and -15%, respectively, through October and November. Surcharges will be HK$832/$106.97 on long-haul flights, and HK$196 on short-haul. The decision, as well as cuts implemented by some foreign carriers, have put pressure on airlines from the Chinese mainland. Air China (BEJ) noted that it will "make a corresponding adjustment" on international routes but ruled out the possibility of a domestic reduction, at least in the short term, as the domestic fuel price lags behind the international rate.

Air China (BEJ) is scrapping plans, for now, to buy China Eastern Airlines (CEA).

Shenyin Wanguo Securities, Aviation Analyst, Li Shurong agreed with Luo, pointing out that "high domestic fuel prices show little possibility [of falling] for the time being and the slowdown of yuan appreciation, and continuous decline of domestic demand are expected to exert a negative impact on Chinese carriers." China International Capital Corp predicted that "excepting Air China (BEJ), most [of China's] carriers [including] China Southern (GUN), China Eastern (CEA), Hainan Airlines (HNA), and Shanghai Airlines (SHA) will post a full-year net loss in 2008."

Air China (BEJ) second quarter (Q2) financial results = net profit of +$22 million, with operating loss of -$151 million.

Ameco Beijing said its landing gear business in the first half of 2008 increased +84% year-over-year. It provides Maintenance Repair & Overhaul (MRO) for such customers as Air China (BEJ), Lufthansa Technik (DLH) (LTK), Cathay Pacific Airways (CAT), Germania (GER), and (GECAS) (GEF).

October 2008: Air China (BEJ) suffered a net loss of -CNY1.9 billion/-$276.5 million in the September quarter owing to weak domestic market demand and fuel hedge writedowns, a big reversal from the +CNY2.2 billion profit in the year-ago quarter. Operating revenue fell -3.8% to CNY13.92 billion against a +24% increase in operating expenses to CNY15.09 billion. (BEJ) Chairman, Kong Dong noted that "market demand has become one of the major factors affecting profitability as international oil prices have substantially declined recently." The carrier also said in a Shanghai Stock Exchange statement that the sharp drop in fuel prices during the quarter resulted in hedge-related losses.

Third-quarter passenger boardings fell -9.4% year-over-year to 8.7 million, as traffic was affected significantly during July and August by security requirements related to the Beijing Olympics. Domestic load factor sank -8.91 points to 74.8% LF and international loads dropped -10 points to 72.1% LF. Cargo traffic dipped -9.5% to 910 million (FTK)s.

Nine-month loss was -CNY657.3 million on a +6.6% lift in operating revenue to CNY39.68 billion.

Looking ahead, Kong was optimistic that "traffic demand growth will recover in the near future. Meanwhile, the decline in jet fuel price will help further lower our operating costs." (BEJ) noted that shareholders approved the purchase of 20 A330s, 15 777s, and 30 737s for delivery in 2011 through 2015.

Air China (BEJ) told the Shanghai Stock Exchange that it expects to report a nine-month deficit, owing to falling demand and fuel hedge losses. It did not reveal specific figures. Its profit through the first nine months of 2007 was +CNY3.5 billion and it was -CNY1.24 billion in the black through the first half of 2008.

Through September 30, (BEJ) had flown 48.87 billion (RPK)s traffic, down -2.6% year-over-year, against a +2.2% increase in capacity (ASK)s to 65.47 billion. Load factor fell -3.7 points to 74.6% LF, and passenger boardings dropped -4% to 25.3 million. Following double-digit negative growth in August, it recovered slightly in September, although operational indicators still headed south. Traffic fell -7.9% to 5.47 billion (RPK)s on a +1.1% increase in capacity to 7.21 billion (ASK)s, producing a load factor of 75.8% LF, down -7.4 points.

Product Development Company (PTC) announced that AMECO Beijing successfully deployed Arbortext, (PTC)'s product information delivery software "for the timely and accurate update" of its Maintenance Repair & Overhaul (MRO)-related manuals.

(BEJ) introduced one 737-800 and one A321 in September and added two A321s on wet-lease from Air Macau (MCU) this month "to better meet the recovering demand in the domestic market."

November 2008: The slump in fuel prices turned out to be the bad news for Air China (BEJ), which suffered a -CNY3.1 billion/-$453.1 million loss on its fuel hedge contract as of October 31, more than three times the CNY961 million forecast. (BEJ)'s hedges were the key driver behind its -CNY1.9 billion third-quarter deficit, which compared to a +CNY2.2 billion profit in the year-ago period. In a statement released by the Shanghai Stock Exchange on November 22, (BEJ) said its hedging contract, which will be valid until 2011, was sealed in July when international oil prices breached $140 per barrel.

Among China's "big three" airlines, (BEJ) is most vulnerable to fluctuation in international fuel prices, as about half its traffic is on international routes. Hedged fuel therefore accounts for 40% to 50% of its fuel consumption. The Chinese government fixes the price of fuel used on domestic operations. Fuel expense accounted for more than >40% of (BEJ)'s total operating costs last quarter.

China Eastern Airlines (CEA) said its fuel hedge write down totaled CNY270.8 million as of October 31, while Cathay Pacific Airways (CAT) expects a hedge loss of -HK$2.8 billion/-$361.2 million in the same time frame.

Hit hard by the continuous decline of the domestic market, China Southern Airlines (GUN) parent, China Southern Group, and China Eastern Airlines (CEA) parent, China Eastern Group are expecting their requests for government aid to be approved. An industry source said that Beijing is expected to inject +CNY3 billion/+$439 million into each airline, allowing China Eastern (CEA) to reduce its net debt ratio to 94.7% from 98%, and China Southern (GUN) to reduce its net debt ratio to 80.5% from 83%.

(GUN) Chairman, Liu Shaoyong had made numerous appeals for up to CNY40 billion in financial aid from Beijing. The carrier reported a -CNY810 million third-quarter loss. (CEA) posted a -CNY2.33 billion loss in the quarter.

Meantime, Air China (BEJ) parent, (CNAC) also reportedly is seeking government capital. (BEJ) reported a -CNY1.9 billion loss in the third quarter.

The Chinese government cut the domestic fuel price -32% to CNY5,050/$736.49 per ton from CNY7,450, marking the sixth time this year, Beijing has adjusted the domestic price. Because of the way in which fuel prices are managed by the government, Chinese airlines have not reaped the immediate benefit of the collapse in oil prices. Fuel expense currently accounts for 40% to 50% of Chinese carriers' total operating expenses. China Southern Airlines (GUN) is expected to benefit most from the new cut as it has the largest number of domestic routes, comprising 80% of its total. According to Shenyin Wanguo Securities Aviation Analyst, Li Shurong (GUN) will save about -CNY5.8 billion in fuel costs annually. China Eastern Airlines (CEA) is expected to save -CNY3 billion, while Air China (BEJ) can save -CNY3.7 billion, as its domestic routes account for only 50% of its total. The (CAAC) (CAC) also cut fuel surcharges on domestic routes by a large margin.

The dream of a direct routing across the Taiwan Strait is closer to reality following the signing of an agreement between Beijing's Association for Relations Across the Tawian Strait and Taipei's Strait Exchange Foundation. The deal, which will take effect in 40 days, will allow carriers to bypass Hong Kong airspace and reduce flight time, operating costs, fuel burn, and emissions.

Taiwanese carriers will have access to 16 cities in mainland China in addition to Beijing, Shanghai, Guangzhou, Xiamen, and Nanjing. They are Chengdu, Chongqing, Hangzhou, Dalian, Guilin, Shenzhen, Wuhan, Fuzhou, Qingdao, Changsha, Haikou, Kunming, Xi'an, Shenyang, Tianjin, and Zhengzhou. The number of permitted weekly roundtrip flights will rise from the current 36 to 108.

Mainland carriers welcomed the move. Air China (BEJ) Party Secretary, Tan Zhihong said the carrier will add 10 A330s and 737-800s to its cross-strait operation, that currently comprises flights to Taipei (TPE) from Beijing (PEK) and Shanghai. He said the newly permitted flight path will save 90 minutes on (PEK) - (TPE), and 80 minutes to/from Shanghai and that (BEJ) will save CNY30 million per year operating 737-800s on the new (PEK) - (TPE) routing.

Nine mainland Chinese carriers were selected to operate weekday flights across the Taiwan Strait and are expected to launch service on December 15, according to the (CAAC) (CAC). In addition to Air China (BEJ), China Eastern Airlines (CEA), China Southern Airlines (GUN), Hainan Airlines (HNA), Xiamen Airlines (XIA), and Shanghai Airlines (SHA), which all already operate weekend cross-strait flights, Sichuan Airlines (SIC), Shandong Airlines (SHG) and Shenzhen Airlines (SHZ) were tapped to operate the weekday flights.

Mainland carriers are permitted to operate 54 weekday flights per week. According to the (CAAC) (CAC), (BEJ) will operate 10 while 12 have been allotted to (CEA), 10 to (GUN), five to (HNA), six to Xiamen (XIA), and five to (SHA). Sichuan (SIC), Shandong (SHG), and Shenzhen (SHZ) each have been granted permission to operate two weekly weekday flights.

Regarding cross-strait cargo flights, (CEA) subsidiary, China Cargo Airlines (CKK), China Southern Airlines (GUN), and Air China Cargo (CAO) have been selected. China Cargo Airlines (CKK) and (GUN) each are expected to operate 10 monthly flights from Shanghai and Guangzhou respectively, while Air China Cargo (CAO) is expected to operate five monthly flights from both Shanghai and Guangzhou.

Ameco Beijing, the joint venture between Air China (BEJ) (60%) and Lufthansa (DLH) (40%), announced deals with Jet2.com (JT2) and Astraeus Airlines (AUA) to provide Maintenance Repair & Overhaul (MRO) on (RB211-535E4) engines (two for Astraeus (AUA) and one for Jet2 (JT2)). Ameco Beijing (BEJ) signed an agreement with Condor (CDF) to add blended winglets for 9 767-300ERs. The modifications plus "C" checks, are expected to start next April 2009. The blended winglets expect fuel savings of -4% to -6% for medium/long-range flights.

December 2008: To brighten a dismal financial performance in 2008, Air China (BEJ) has painted 2 A330-243s to promote its "Forbidden Pavilion First Class" (B-6075 "Zijin Hao," meaning "Forbidden Pavilion Liner") and "Capital Pavilion Business Class" (B-6076, Zichen Hao, "Capital Pavilion Liner." The color schemes reflect the artistic logos of the two cabins. SEE ATTACHED PHOTOS - - "BEJ-A330-DEC08."

December 2009: 737-89L (36491, B-5198), and A321-213 (3725, B-6386), deliveries.

January 2009: Air China (BEJ) and Shanghai Airlines (SHA) joined China Southern Airlines (GUN) and China Eastern Airlines (CEA) in announcing that they expect to report losses for 2008. Both (BEJ) and (SHA) cited "the decline in market demand" that was exacerbated by the impact of May's Sichuan earthquakes, stricter security measures surrounding the Beijing Olympics, the global financial crisis and "much higher fuel expenses" until the recent fall in oil prices. The resulting fuel hedge losses then became a culprit.

(BEJ) noted that it suffered a -CNY6.8 billion/-$993.3 million loss resulting from a write down in the value of its fuel hedges on December 31. (BEJ) reported cash losses of -$5.9 million and -$52.8 million on its fuel hedge contract in November and December, respectively.

(SHA) said it posted a -CNY8.5 million cash loss on its fuel hedge contract as of December 31, while the full-year write down totaled CNY170 million.

This month Citibank predicted that (BEJ) would report a net loss of -CNY7.7 billion. (BEJ) posted a -CNY3.88 billion loss in 2007, while (SHA) suffered a- CNY435.1 million loss in the same time frame.

Air China (BEJ) parent China National Aviation Holding Company (CNAC) intends to take over struggling Wuhan-based, East Star Airlines (ESR) in an effort to expand its foothold in central China.
(BEJ) said in a statement that (CNAC) "has had an initial discussion with (ESR) about purchasing its shares," without revealing how much (CNAC) was planning to buy. There has been no formal agreement.

Industry analysts noted that (BEJ) would enhance its position in the region through an acquisition of (ESR), as (BEJ) does not operate a base at Wuhan, the capital of Hubei Province. China Southern Airlines (GUN) and China Eastern Airlines (CEA) do operate bases there, with (GUN) grabbing 40% of the Wuhan market and (CEA) plus (ESR) holding more than >20% and >10%, respectively. (BEJ) accounts for only 5%.

(BEJ) Chairman, Kong Dong had said that the carrier would "change its previous practice of just focusing on large domestic cities in 2009 and will give some attention to secondary cities," owing to the tough external operating environment. (ESR) currently leases nine A320s and A319s and operates to 16 domestic destinations from Wuhan. (ESR) is struggling to survive as it has been unable to pay off significant debt owed to certain airports.

737-86N (36811, B-5197), and A321-213 (3766, B-6555), deliveries.

February 2009: Air China (BEJ) is blaming its fuel hedges for its 2008 loss and plans to shift more attention to boosting ancillary revenue to help engineer a turnaround this year. (BEJ) reported a -CNY6.8 billion/-$993.2 million non-cash loss resulting from a December 31 write down in the value of its fuel hedges. It recorded cash losses of -$5.9 million and -$52.8 million on its fuel hedge contract in November and December, respectively.

In addition, CFO & VP, Fan Cheng noted that a "slowdown" in yuan appreciation reduced (BEJ)'s foreign exchange gain by a significant margin. Declining market demand exacerbated by the Sichuan earthquakes, Olympic-related security measures, the global financial crisis and an "absence of investment return" owing to Cathay Pacific Airways (CAT)'s loss also were cited as culprits. (BEJ) did not reveal any final financial figures but is expected to do so when its annual report is released in April.

(BEJ) remains confident it can reverse its fortunes in 2009. "Although we suffered from operating difficulties last year, we are still quite competitive, with a healthy balance sheet and smooth cash flow," Board Secretary, Huang Bin said.

In order to turn a profit, (BEJ) will shift more attention to diversifying into airline support business by establishing a foothold in industries such as logistics, airplane Maintenance Repair & Overhaul (MRO) (it already is the majority partner in Ameco Beijing), airport management, ground handling, tourism, media and finance, Huang said, although he emphasized the "airline business" will remain the focus. "Our goal is to reduce the risk of too much dependence on the airline business in a difficult operating environment so as to make a profit this year," he explained. Airline revenue currently accounts for 90% of (BEJ)'s total. It also is considering releasing medium-term notes soon in an effort to raise CNY6 billion in financing.

(BEJ) is evaluating the purchase of a 24% stake in Air China Cargo (CAO) worth CNY718 million from Beijing Capital Airport Holding Company. (BEJ) Board Secretary, Huang Bing noted a final decision on making the cargo company a wholly owned (BEJ) subsidiary "will depend on the specific situation of the cargo market at home and abroad." Last year, (BEJ) raised its stake in (CAO) to 76% from 51% through purchase of Gold Leaf Enterprise Holdings' stake in (CAO) shareholder Langxing Company. (BEJ) previously had said that owning 100% of (CAO) would pave the way for its joint venture with Cathay Pacific Airways (CAT). Launched in March 2003, (CAO) has registered capital of CNY2.2 billion and suffered a 2008 net loss of -CNY522 million on operating revenue of CNY6.99 billion.

(GECAS) (GEF) delivered one new 737-800 to (BEJ). It currently leases 16 other airplanes to (BEJ). A321-213 (3806, B-6556), delivery.

March 2009: Air China (BEJ) is pessimistic about its financial prospects and now is not expecting a turnaround this year. It already has said it expects to report a heavy loss for 2008, and Chairman, Kong Dong said, "We don't have confidence that the carrier will earn a profit this year," "Reuters" reported. Kong revealed that (BEJ)'s cargo volume has hit a new low, dropping -30% to -40%.

(BEJ) is hoping to get a capital injection from (CAAC) (CAC) Beijing, similar to the CNY7 billion ($1.02 billion) and CNY3 billion received by China Eastern Airlines (CEA) and China Southern Airlines (GUN), respectively. At the end of 2008, (BEJ) requested that state-owned parent China National Aviation Holding Company inject capital and reduce its 69% debt ratio but it has not received a reply. Meanwhile, it plans to retire eight older airplanes but has no plans to defer any of the 24 deliveries scheduled for this year.

Kong also said that despite the market downturn, now is not the time to consider a merger among China's "big three." But (BEJ) is continuing to acquire smaller carriers and is on the verge of closing on its purchase of East Star Airlines (ESA).

Later, (ESR) was forced to suspend operations by the (CAAC) (CAC) owing to its heavy debt burden and the collapse of a stake sale deal with (BEJ) parent, (CNAC). It is the second privately held Chinese carrier to suspend service in recent months. Okay Airways (OKA) stopped flying in December, but resumed operations the following month.

(ESR) has been in financial crisis since last year. In June, the (CAC) suspended its right to fly to Shanghai, Guangzhou and Shenzhen because it was unable to remit "air transport funds" to the regulator in time. At year end, airports in Shenzhen, Yunnan and Hangzhou threatened to stop providing services to the carrier unless it paid the service fees it owed. According to the Wuhan Municipal Transport Committee, (ESR) also failed to make lease payments on its 10 A320s to (GECAS) (GEF), forcing the lessor to seek a legal settlement. (ESR)'s current debt is roughly estimated at CNY17 billion/$2.48 billion.

(ESR) was close to selling a stake to (BEJ) parent (CNAC) in an effort to boost liquidity. (BEJ) Chairman, Kong Dong noted recently that (CNAC) was "on the verge of closing on its purchase of (ESR)," but in a statement it released, (ESR) said it would not sell to (CNAC) owing to "its different management concept from (CNAC) and its much smaller size compared to the (CNAC)." A (CNAC) spokesperson said the company sent a letter to (ESR) trying to find out why the offer was rejected without warning or notification but there has been no reply. The spokesperson said (CNAC) remains committed to establishing a presence in the Wuhan market. It signed a cooperative agreement with the Hubai provincial government this month.

(BEJ) parent (CNAC) intends to move forward with its acquisition of a stake in (ESR), despite the Wuhan-based carrier's "strong opposition" to its "forceful purchase." (ESR) was forced to suspend operations on March 15 by the (CAAC) (CAC) owing to its heavy debt burden and the collapse of a stake sale deal with (CNAC). Chairman, Lan Shili was reported to have been kept under surveillance by local police following (ESR)'s suspension. (ESR) sent an e-mail to (CNAC) outlining its objections to the sale.

A (CNAC) spokesperson said, "For now, the working group [CNAC] sent to Wuhan for the stake purchase deal with (ESR), is staying in Wuhan, as the company hopes to continue pushing forward the deal with (ESR)." But the spokesperson also admitted that the "attitude and concrete measures taken by the Wuhan local government" will be a critical factor in (CNAC)'s effort to take control of (ESR). It currently is negotiating the wet-lease of (ESR)'s airplanes.

"Of course the Wuhan government hopes (CNAC) can successfully seal the stake purchase deal with (ESR) so that Wuhan's position as an aviation hub in central China can be strengthened," a Wuhan government transport committee spokesperson said, while stressing that local authorities will not force (ESR) to accept (CNAC)'s offer to merge with (BEJ). The government said that allowing (ESR) to go bankrupt is an option.

Launched in June 2005, (ESR) has registered capital of CNY80 million. Its 10 A320s operate on more than >20 domestic routes from its Guangzhou, Zhengzhou and Wuhan bases.

(ESR) will go bankrupt because of its inability to pay off its debts, according to the Wuhan municipal government. (ESR)'s six debtors reportedly have asked the local court to liquidate the carrier, which suffered a -CNY500 million/-$73.1 million operating loss last year. It is in arrears with both (GECAS) (GEF) and Wuhan Tianhe International Airport and also is behind on its fuel and insurance payments.

(ESR) was forced to suspend operations by the (CAAC) because of the debts and its decision not to sell a stake to (BEJ) parent, (CNAC).

A Wuhan government spokesperson said authorities are considering allowing (BEJ) to operate (ESR)'s airplanes (with (ESR) staff), which would uphold the cooperation agreement signed with (BEJ) three weeks ago. "(CNAC) is committed to exploring the market in the middle part of China," a (CNAC) spokesperson said. It still hopes to acquire a stake in (ESR) but will consider alternatives to increasing its foothold in the region. The spokesperson did not confirm reports that (CNAC) intends to establish a Wuhan branch company.

Naverus will design performance-based navigation (PBN) procedures for (BEJ)'s A330 fleet at Lhasa under a contract signed with (BEJ). It already has implemented (PBN) procedures at the airport for (BEJ)'s 757s and A319s.

2 737-89Ls (36492, B-5387; 36741, B-5422 - - SEE PHOTO - - "BEJ-737-89L-MAR09"), deliveries.

April 2009: Air China (BEJ) joined its "big three" rivals in suffering a significant 2008 loss, reporting a -CNY9.15 billion/-$1.34 billion deficit under Chinese accounting standards that marked a reversal from the +CNY3.7 billion profit in the previous year. China Southern Airlines (GUN) reported a -CNY4.82 billion loss last year and China Eastern Airlines (CEA) lost -CNY13.93 billion. (BEJ)'s 2008 deficit under international accounting standards was -CNY9.26 billion, according to a filing cited by Dow Jones. (BEJ) blamed falling demand and fuel hedge losses for the result. Revenue climbed +7% last year to CNY52.97 billion.

(BEJ) also announced its first-quarter result, a +CNY981.2 million profit that was down -5.7% from the +CNY1.04 billion earned in the year-ago period but that represents a signal that the Chinese airline industry is starting to turn around. (CAAC) (CAC) Minister, Li Jiaxiang said that he expects a collective first-quarter profit. (BEJ)'s first-quarter revenue was down -12% to CNY11.24 billion.

In early March, (BEJ) Chairman, Kong Dong expressed pessimism about the carrier's 2009 prospects and said he did not expect a profitable year. The company has yet to receive word on its request for a capital injection from the Chinese government.

(BEJ) revealed in a filing with the Hong Kong Stock Exchange that it has purchased Beijing Capital Airport Holding Company's 24% stake in Air China Cargo (CAO) for CNY718 million/$105 million, completing a process started last year that has seen its share of its cargo unit rise from 51% to 100%.

Airlines on either side of the Taiwan Strait are expected to reap further benefits following the recent signing of an expanded agreement by the Taipei-based Strait Exchange Foundation and the Beijing-based Association for Relations Across the Taiwan Strait that will more than double the number of permitted flights. Direct cross-strait flights will be increased from the current 108 per week to 270. The increase likely will take affect in July. In addition, Taiwanese carriers will be granted access to six new cities - - Hefei, Harbin, Nanchang, Guiyang, Ningbo and Jinan - - bringing to 27 the number of mainland gateways available. Airlines flying to Taiwan from Guangzhou, Shenzhen and Xiamen no longer will be required to bypass Hong Kong, while an additional route to the north has been created to alleviate crowding aboard the increasingly popular services.

The frequency increase is not as high as was anticipated in February but still is significant. Cross-strait routes enjoy load factors of more than >80%, higher than nearly all domestic mainland and international routes despite the global economic and industry downturn. "The cross-strait routes are 'golden' routes, as they are the most profitable," (EVA) Air mainland spokesperson, Ke Jincheng said. "The supplementary agreement has encouraged us a lot and is very positive news for our carriers hit hard by the global financial crisis." (EVA)'s first quarter was its first three-month period in the black since the third quarter of 2007.

Industry analysts pointed out that China Eastern Airlines (CEA) should benefit most from the expanded agreement, as the Shanghai-based carrier has bases in Hefei, Nanchang, Ningbo and Jinan, while China Southern Airlines (GUN) has bases in Harbin and Guiyang, and Air China (BEJ) has a base in Jinan. (CEA) Board Secretary, Luo Zhuping said the carrier's cross-strait routes have operated at 80% to 90% capacity and that it plans to fly to Taiwan from the new cities.

On the cargo front, the new agreement permits belly freight for the first time and boosts cargo flights from the current 60 per month to 112.

APG Global Associates said five more airlines joined its interline e-ticketing program - - (BEJ), China Eastern Airlines (CEA), Ghana International Airlines (GHN), Phoebus Apollo Aviation (PHB) and Zambezi Airlines (ZBZ). Joining APG IET permits airlines to use the Heli Air Monaco (YO/747) e-ticket as a neutral ticketing platform.

May 2009: Chinese airlines adopted a new pricing standard that effectively will raise fares by approximately +10%. On April 20, carriers began offering discounts on the base price of the ticket only versus the previous practice of discounting on the full rate comprising the base and floating prices. The new standard has upset many travelers in China, although many discounted fares remain available on airlines' websites. Both Air China (BEJ) and China Southern Airlines (GUN) denied the new standard was designed to raise fares, insisting that they are only intent on improving sales systems and plan to adhere to the national ticket policy enacted in 2004. The CAAC (CAC) denied media reports suggesting there was collusion among major Chinese carriers.

(BEJ) and China Eastern Airlines (CEA) insisted that fuel hedging is a solid long-term strategy and pledged to continue with it to insulate them from price fluctuation despite huge hedging losses for full-year 2008 and the 2009 first quarter. (BEJ) and (CEA) reported -CNY948 million/-$138.8 million and -CNY916 million fuel hedge losses respectively in the first quarter, which followed hedging losses of -CNY7.47 billion and -CNY6.2 billion, respectively, by the two carriers for full-year 2008.

Meantime, TravelSky Technology Ltd (eTerm), China's state-owned Information Technology (IT) solutions provider, upgraded carriers' sales systems in accordance with the new standard. TravelSky is the system used by nearly all Chinese airlines. Spring Airlines (CQH) is an exception and has developed its own system.

(BEJ) is expected to establish a branch company in Wuhan, capital of Hubei Province, following the collapse of parent (CNAC)'s deal with East Star Airlines (ESR). (ESR) suspended operations in March and went bankrupt after its decision not to partner with CNAC, and now (BEJ) plans to purchase assets including (ESR)'s routes and slots. It intends to rehire (ESR) staff. "We have applied to the (CAAC) (CAC) to establish our branch company in Wuhan owing to the failure of our stake purchase deal with (ESR)," a (BEJ) spokesperson confirmed.

Based on an agreement signed by (BEJ) and the provincial government in early March, (BEJ) will allocate 15 airplanes to the Wuhan market and launch service to Paris, Tokyo and Singapore by 2010. (BEJ) plans to increase the fleet number to 30 by 2015 and open routes to Los Angeles, London and Berlin. (BEJ) currently accounts for only 5% of the Wuhan market while (GUN) has 40% and (CEA) holds more than >20%. (ESR) took 10%.

(BEJ) also plans to establish a deeper foothold in Shanghai. Chairman, Kong Dong claimed that it aims to raise its market share in China's most populous city to 20% this year from 14%. He also said (BEJ) expects to introduce 27 new airplanes in 2009 and retire 8 to 10 as their lease expire. It plans to purchase wide bodies starting in 2011. Kong also expressed concern over the swine flu epidemic, drawing comparisons to the (SARS) scare in 2003. "We are paying close attention to market changes. Our biggest worry is that swine flu might affect international travel. Hopefully, it won't have too much of a negative impact on market demand that has just started showing signs of recovery," he said.

(BEJ) launched a mobile check-in service, becoming the second Chinese carrier after China Southern Airlines (GUN) to offer the option. (BEJ) started trialing the service on April 30 and said it received positive feedback from passengers. It will be available on all domestic routes from Beijing save Tibet, while (GUN) offers it only on Guangzhou - Zhengzhou flights. (BEJ) VP, Yang Lihua told reporters Friday that the airline intends to extend mobile check-in to other domestic airports once they have the required equipment. Meantime, it launched online check-in on its UK and Sweden websites for flights departing London Heathrow and Stockholm Arlanda.

Beijing to Yekaterinburg, using 767s.

737-89L (36743, B-5425), delivery.

June 2009: Air China (BEJ) is cutting its international capacity owing to the market downturn but will not go so far as to defer any airplane deliveries this year, Managing Director, Lou Yongfeng said.
Lou noted that (BEJ)'s international load factor dropped -3.5 points in the first four months of 2009 from the year-ago period, although he did not reveal the exact figure. "And we are having a difficult time in May and now owing to swine flu, so we have to cut some international capacity," he explained. (BEJ) expects a recovery in the international market before year end and does not plan on opening any new routes for the rest of the year.

It has replaced 747s with A330s on some long-haul routes but has no intention to alter its fleet plan. "We will take delivery of more than 20 short-haul airplanes and medium-haul airplanes as scheduled this year and won't cancel or defer airplane orders," Lou said firmly. Regarding the delay in the 15 787s it has ordered, (BEJ) said it is still negotiating with Boeing (TBC) on compensation. Chairman, Kong Dong said last month that (BEJ) plans to purchase more wide bodies starting in 2011.

Compared with the international market, (BEJ)'s domestic operation is faring much better. "Our load factor on domestic routes jumped +11 points from January through April over the year-ago period," Lou said. (BEJ) expects domestic passenger boardings in 2009 to increase +10%. (BEJ) transported 28 million total passengers last year.

(BEJ)'s flights across the Taiwan Strait are another source of growth. He said loads are averaging 78% LF. (BEJ) currently operates 57 weekly cross-strait flights from Beijing, Shanghai, Hangzhou, Chengdu, Chongqing, and Tianjin.

Lou revealed that its Wuhan Branch Company has been approved by the (CAAC) (CAC) and preparation for launch is underway.

East Star Airlines (ESR) may avoid bankruptcy thanks to a takeover offer from Shanghai YuField Industrial Company (SYIC), which submitted its application along with airline stakeholder East Star Tourist Agency (ESTA) to the Wuhan court. Shanghai YuField is expected to lead a consortium that will purchase an 85% stake in (ESR), while original stakeholders East Star Group, ESTA and East Star Holding Company will hold the remainder. The (CAAC) (CAC) forced (ESR) to suspend operations in February owing to its inability to pay off debt. (ESR) had rejected a takeover bid from Air China (BEJ)'s parent company just recently. Its debts reportedly exceed CNY500 million/$73 million.

"After (ESR) announced it would go through bankruptcy procedures [in March], we have been looking for strategic investors to save it from bankruptcy. Now we have found Shanghai YuField and reached an agreement," (ESTA) Vice General Manager, Wu Zhiyong said.

(SYIC) apparently is not the only suitor. There are at least three other strategic investors ready to make CNY5 million investments. Approval of the takeover application is not a formality and the court is obliged to hear the views of (ESR)'s debtors, which include (GECAS) (GEF), China National Aviation Fuel Group, and some domestic airports.

Industry analysts pointed out that (ESR) still faces "many difficulties" even if (SYIC)'s application is approved owing to its fleet issues and fierce competition in Wuhan. It had nine A320s before suspending operations, but those airplanes either have been detained by debtor airports or repossessed by (GECAS) (GEF).

Later, (BEJ) launched its Hubei branch company, officially abandoning its pursuit of (ESR) and opening service from Wuhan to Guangzhou, Hangzhou and Shenzhen. (BEJ) is basing six airplanes at Wuhan and plans to introduce another half-dozen by year end, by which time it will have launched service to Xi'an, Urumqi, Nanjing, Shenyang, Macau (July), and Taipei (August). "We will develop our network in the middle part of China on our own. So whether (ESR) goes bankrupt or introduces new investors doesn't bother us at all. We won't have anything to do with it anymore," a spokesperson from (BEJ) parent (CNAC) said. The Hubei branch has hired about 600 former (ESR) employees, including 47 pilots (FC).

Meanwhile, (ESR) suffered a blow as the Wuhan court rejected the takeover offer from the Shanghai YuField Industrial Company. East Star investor East Star Tourist Agency said it would appeal to the Hubei provincial court.

(ESR)'s liquidation team comprising Wuhan government organs had rejected the takeover offer, citing the large debt owed by (ESR). According to the Wuhan Zhonghuan Accounting Firm, (ESR) has debt of CNY1.01 billion/$147 million with a negative net asset value of CNY579.9 million.

Air Macau (MCU) is expected to get a +MOP507.3 million/+$62.4 million capital injection from Air China (BEJ) and other stakeholders designed to help it avoid liquidation. (BEJ) said in a statement that shareholders approved the plan last month. Hit hard by the increasing number of direct flights across the Taiwan Strait and the harsh economic environment, (MCU)'s 2008 loss exceeded the -MOP109 million posted in 2007, Chairman, Zhao Xiaohang told the "Macau Daily News." Its net asset value was approximately MOP-107.3 million as of December 31. According to local law, since the net asset value of the carrier is negative/lower than half the value of its issued share capital, shareholders must either replenish its assets or dissolve it. (MCU) is owned by (BEJ) parent, China National Aviation Corporation (51%), Servicos Administracao e Participacoes - - which includes (TAP) Portugal and Banco Nacional Ultramarino - - (20%), Sociedade de Turismo e Diversoes de Macau (14%), (EVA) Air (5%), and others.

International Aero Engines (IAE) announced a (V2500) order from Air China (BEJ) covering 22 A320s/A321s for delivery beginning in April 2010. The deal is worth some $700 million including the SelectOne build standard and a long-term aftermarket agreement. (BEJ) already operates the (V2500) on 9 A319s.

Ameco Beijing (BEJ) completed winglet installation on the first of nine Condor Airlines (CDF) 767s. The airplane also underwent a "C" maintenance check and cabin modification.

737-85N (36774, B-5455), for Shandong Airlines (SHG) operations. 737-86N (36812, B-5431), (GEF) leased. A321-213 (3940, B-6599), delivery.

July 2009: Air China (BEJ) expects its first-half profit to jump by more than >50% year-over-year from the +CNY1.28 billion/+$187.3 million reported in the first six months of 2008.

(BEJ) credited "stable growth of the domestic market" and lower fuel prices for the improvement. (BEJ) transported 13.9 million passengers in the first five months of 2009, up +13.7% year-over-year, which included a +18.2% surge in domestic passenger boardings to 11.2 million. (BEJ) also cited "favorable policy" from Beijing, cost control and gains on its fuel hedges.

In 2008, (BEJ) reported a -CNY7.47 billion non cash fuel hedge loss and a -CNY448 million cash loss, which contributed to its full-year deficit of -CNY9.15 billion. (BEJ) said it may recoup $609 million of the non cash loss if oil ends the year at $62.44 per barrel, or by as much as $854 million at $80.28 per barrel.

China Eastern Airlines (CEA) will benefit the most from the agreement reached in April to expand significantly the number of flights permitted across the Taiwan Strait, according to a cross-strait distribution plan released by the (CAAC) (CAC). The Taipei-based Strait Exchange Foundation and the Beijing-based Association for Relations Across the Taiwan Strait, signed the accord that increases from 108 to 270 the number of direct flights allowed beginning this month. Under the (CAC)'s plan, (CEA) is designated to operate 58 weekly flights to Taipei from Shanghai, Nanjing, Wuhan, Qingdao, Kunming, Xi'an, Hefei, Ningbo, and Nanchang. (CEA) Board Secretary, Luo Zhuping noted that the carrier's cross-strait routes are among its most profitable and have operated at 80% to 90% (ASK) capacity on average.

Air China (BEJ) was assigned 54 weekly flights to Taipei from Beijing, Shanghai, Chengdu, Chongqing, Hangzhou, Tianjin, and Guiyang. China Southern Airlines (GUN) also was allocated 54 weekly flights to Taipei to be operated from Shanghai, Guangzhou, Xiamen, Dalian, Guilin, Shenzhen, Wuhan, Changsha, Haikou, Shenyang, Zhengzhou, Harbin, and Guiyang.

Hainan Airlines (HNA) and Shanghai Airlines (SHA) each were allocated 20 weekly flights, while Xiamen Airlines (XIA) was given 22. Sichuan Airlines (SIC), Shandong Airlines (SHG) and Shenzhen Airlines (SHZ) were granted 14 weekly flights each.

On the cargo front, Air China Cargo (CAO) was assigned 10 weekly flights to Taipei from Shanghai and Guangzhou, while (CEA) subsidiary China Cargo Airlines (CKK) was assigned eight weekly flights from Shanghai to Taipei and China Southern (GUN) was assigned 10 weekly flights from Guangzhou to Taipei.

Naverus said Air China (BEJ) successfully completed its Required Navigation Performance (RNP) validation flight into Lhasa from Chengdu on June 26 using an A330-200. "The flight clears the way for (BEJ)'s entire fleet of A330s to fly the Naverus-designed procedures at the Lhasa Gonggar Airport," Naverus said.

Ameco Beijing (BEJ) signed a deal with Air India Charters covering "C" maintenance checks on eight 737-800s.

Boeing (TBC) said (BEJ) selected its Airplane Health Management system to cover 117 737NGs in service and on order.

737-85N (36775, B-5457), delivered to Shandong Airlines (SHG) and transferred to Air China (BEJ). 737-86N (36813, B-5436), 737-89L (36744, B-5426), and A321-213 (3973, B-6593).

As of June, 145 of (BEJ)'s planes were based in Beijing and another 38 in Chengdu.

August 2009: Boosted by a domestic market that "did better than expected," Air China (BEJ) reported a +CNY2.82 billion/+$411.8 million profit in the first six months of 2009 under (IFRS), more than double the restated +CNY1.05 billion earned in the year-ago semester. The result implies second-quarter earnings of +CNY1.84 billion based on its first-quarter profit of +CNY981.2 million and is significantly higher than the figure forecast last month, when it said it expected a +50% year-over-year profit increase.

Half-year revenue fell -9.6% to CNY23.11 billion but costs declined -20.9% to CNY20.29 billion, boosting (BEJ)'s operating result to a +CNY2.82 billion profit from the -CNY83.7 million loss suffered in the first six months of 2008. Fuel costs were down -42.5% and the company realized a +CNY1.45 billion gain from changes in the fair value of its fuel hedges. Its airline segment produced a +CNY2.88 billion profit compared to +CNY846.1 million last year.

(BEJ) credited Beijing's "policy of spurring domestic demand and related measures taken by the industry to fight the financial crisis." It raised capacity +21.2% to 27.92 billion (ASK)s and saw traffic rise +18.7% to 21.23 billion (RPK)s. Domestic passenger numbers grew +18.2% to 15.8 million but group-wide load factor dropped -1.6 points to 75.7% LF.

Difficulties on the international front continued, with flights to Athens and several South Korean destinations suspended and frequencies cut on routes to Japan, Korea, Europe and North America. It flew 14.6 billion international (RPK)s, down -9.4%, against a -9% cut in capacity to 20.15 billion (ASK)s. Load factor dropped -0.4 point to 72.5% LF.

(BEJ) took delivery of 10 airplanes during the semester and retired 11 and has cut its planned full-year capital expenditure by nearly -20%. It said it "anticipates the impact of the global financial crisis on international air passenger and cargo business will continue" through year end as "the overly rapid increase in traffic capacity by the domestic airlines and the intensified price competition will affect the ability of the company to improve its yield."

TAM (TPR) and Air China (BEJ) announced that they will begin code sharing on flights this month to allow passengers to travel between Sao Paulo (GRU) and Beijing (PEK), via Madrid Barajas (MAD). (TPR) passengers originating at (GRU) will be able to connect to (MAD) - (PEK) Air China (BEJ) flights while (BEJ) passengers originating in the Chinese capital will be able to connect to (MAD) - (GRU) (TPR) flights. Both carriers are members of the Star Alliance (SAL). "This is the first agreement we have made with an Asian company, a fact made more significant by being made with a company that has such an extensive network," (TPR) VP Commercial & Planning, Paulo Castello Branco said.

Ameco Aviation College (AAC) opened its new CNY50 million/$7.3 million, 7,400-sq-m extension at Beijing Capital International. The facility contains classrooms and a workshop. (AAC) now can host some 400 students for type training and 550 for basic/apprentice training at any given time. Ameco Beijing is a joint venture between Air China (BEJ) (60%) and Lufthansa (DLH) (40%).

The (CAAC) (CAC) approved China Eastern Airlines (CEA)'s acquisition of Shanghai Airlines (SHA), according to (CEA) General Manager, Ma Xulun. The merger still requires the approval of both carriers' shareholders, but (CEA) said it has started the merger process and expects the transaction to be completed by year end. A shareholders conference is planned for October 9 to consider and vote on the merger and approval is expected.

"The total fleet of (CEA) and (SHA) is more than >300 airplanes, so we plan to make a more reasonable utilization of these airplanes during winter and spring flight schedules," Ma said. He revealed that (CEA) plans to promote Express Air Service to denote high frequency on the 22 routes the carriers share. "On some routes, the daily frequencies will be boosted to 14. That is, a flight will be operated every half hour," he said.

Huang Bin, board secretary for Air China (BEJ), said, "(CEA)'s merger with (SHA) will definitely change the competition scenario of the Shanghai air transport market." But he affirmed that it won't affect (BEJ)'s determination to make Shanghai its international gateway.
He added that (BEJ) will "accelerate the preparation process with Cathay Pacific Airways (CAT) to launch a cargo joint venture (JV) based in Shanghai." (BEJ) VP, Fan Cheng told reporters that the asset valuation for the (JV) is "nearing an end," paving the way for it to be launched by year end.

September 2009: Naverus said that Air China (BEJ), with support from the (CAAC) (CAC), successfully completed a Required Navigation Performance (RNP) validation flight to Tibet's Linzhi Airport on September 2 using an A319. Naverus called the 95-mile (RNP) approach into the Himalayan airport at 9,760 ft elevation "one of the longest and most challenging commercial jetliner landing paths." Without (RNP), the airport "is accessible by air only 100 days a year, in daylight only, due to weather and terrain challenges."

(ARINC) said Air China (BEJ), Air Macau (MCU), Asiana Airlines (AAR), Cathay Pacific Airways (CAT), China Southern Airlines (GUN), Dragonair (DRG) and Korean Air (KAL) signed up to use its AviNet Airport wide-area network service, which is available to carriers using its Muse common-use passenger systems.

2 737-86Ns (36815, B-5437; 36816, B-5438), 2 737-89Ls (36745, B-5442; 36746, B-5443), 2 A320-216s (4070, 9M-AHU; 4079, 9M-AHV), and 3 A321-213s (4022, B-6595; 4031, B-6596; 4062, B-6597), deliveries.

November 2009: Air China (BEJ) announced it is re-starting Beijing - Sao Paulo, via Madrid, a route asSisted by the presence in Brazil of its Star Alliance (SAL) partner, TAM (TPR). Also, Beijing to Tokyo Haneda, to complemet its existing service to Tokyo Narita. New domestic routes include Beijing to Daqing, an oil city in the far northeast, Chengdu to Zhuhai, near Hong Kong, and Shenzhen to Dazhou in the Sichuan province. It also flies across the Taiwan strait to Taipei from six mainland cities: Beijing; Chengdu; Chongqing; Hangzhou; Shanghai; and Tianjin.

China's cargo industry appears to be moving toward consolidation as airfreight players look to mitigate damage from continuing losses that have resulted from the global economic downturn. According to an industry insider, Chinese logistics giant Sinotrans has signed a cooperative agreement with China Eastern Airlines (CEA) and "is considering selling some or all of its stake" in Grandstar Cargo International Airlines (GSC), the joint venture carrier it launched with Korean Air (KAL) last year. Sinotrans owns 51% of (GSC) while (KAL) controls 25%. A further 13% is owned by Hana Capital Company and 11% by Shinhan Capital Company. The industry source said that the Sinotrans stake would be sold to either (CEA) or Air China (BEJ), with which the logistics company signed a similar cooperative agreement earlier this year. A final decision on the stake sale has not been made, the insider said.

Grandstar (GSC) has been unable to turn a profit in its first 17 months of operation. Sinotrans cited a -CNY61.8 million/-$9 million third-quarter deficit on its investment in a recent report to investors. (GSC) has not expanded beyond its initial Tianjin - Frankfurt route.

Additional air cargo consolidation in China could result from Air China (BEJ)'s negotiations with Cathay Pacific Airways (CAT) to launch a cargo (JV) in Shanghai by next spring. Also, (CEA) subsidiary, China Cargo Airlines (CKK)'s merger with Shanghai Cargo Airlines likely will result from the pending (CEA) acquisition of Shanghai Airlines (SHA).

China has nine cargo carriers that operated a total freighter fleet of 70 airplanes as of December 31, 2008. But hit hard by the global financial crisis, those carriers are suffering from serious financial difficulties, especially on international routes. The (CAAC) (CAC) last month implemented a series of measures designed to lift the nation's airfreight carriers out of the red, including increasing shipping rates, providing subsidies and encouraging mergers and consolidation.

Rolls-Royce (RRC) won an order for (Trent 700)s to power 20 A330s ordered by Air China (BEJ) and scheduled to begin delivery in 2011. The contract is worth $1.5 billion at list prices and includes TotalCare service support.

A321-213 (4091, B-6605), delivery.

December 2009: Air China (BEJ) will inject MOP158.7 million/$19.3 million into troubled subsidiary, Air Macau (MCU), lifting its stake in the carrier to 80.9% from 51%.

Air China (BEJ) Senior VP, Fan Cheng was named Communist Party Secretary at Shenzhen Airlines (SHZ), increasing speculation in China that (BEJ) will seek control of (SHZ) following the arrest of controlling shareholder, Li Zeyuan. Fan reportedly will oversee day-to-day operations at (SHZ), in which (BEJ) currently holds 25%.

The global financial crisis and liberalized access to flights across the Taiwan Strait dragged (MCU) to a -MOP107.3 million loss in 2008 and a -MOP150 million deficit through the first five months of 2009. (BEJ) said it remains confident in (MCU)'s future, however, citing "fast economic growth" in the territory and potential synergies between Macau International airport and Hong Kong International airport that will arise if the bridges connecting the two special administrative regions via Zhuhai are completed.

Other current stakeholders in (MCU) are (TAP) Portugal's SEAP investment fund (20%), the Sociedade de Turismo e Diversoes de Macau casino company (14%), the Macau government (5%) and (EVA) Air (5%). SEAP's share will drop to 0.1% and (EVA)'s to 0.025% following (BEJ)'s capital injection. (BEJ) also holds significant stakes in Cathay Pacific Airways (CAT), Shenzhen Airlines (SHZ) and Shandong Airlines (SHG).

Air China (BEJ) signed an agreement with Expedia Affiliate Network allowing (BEJ) customers in 27 foreign countries to book hotels and flights simultaneously.

2 737-89Ls (36747, B-5485; 36748, B-5486) and A321-213 (4131, B-6603), deliveries.

January 2010: Air China (BEJ) parent, (CNAC) is expected to receive a CNY1.5 billion/$219.4 million cash injection from the Chinese government to pay back the loans it used to finalize last year's acquisition of its Air China Cargo (CAO) subsidiary, according to (BEJ) Board Secretary, Huang Bin.

The move is another step toward finalizing the cargo joint venture between Air China (BEJ) and Cathay Pacific Airways (CAT) scheduled to be launched this year in Shanghai. (BEJ) increased its stake in the cargo company to 100% with the CNY718 million purchase of Beijing Capital Airport Holding Company's 24% share last spring.

Air China Cargo (CAO) was launched in 2003 with registered capital of CNY2.2 billion. (BEJ) held 51% initially, while Citic Pacific subsidiary Gold Leaf Enterprises had 25% and (BCAH) 24%. (BEJ)'s acquisition of the remaining 49% cost CNY1.57 billion.

"The CNY1.5 billion government cash injection will be used mainly to pay back our loans for purchasing the remaining 49% stake from minority stakeholders," Huang confirmed. As early as 2008, Beijing had decided to distribute CNY15 billion to the "big three" Chinese airlines. China Eastern Airlines (CEA) already has received CNY9 billion in government funds, and China Southern Airlines (GUN) CNY3 billion over the past two years. The trio now will be vying for the remaining CNY1.5 billion.

Ameco Beijing announced the start of a "C" maintenance check on a (LOT) Polish Airlines 767-300, its first airframe overhaul for the carrier.

2 737-89Ls (36749, B-5495; 36750, B-5496), deliveries.

February 2010: Air China (BEJ) will increase its daily, Beijing - Vancouver A330-200 service to 10-times-weekly from June.

Air China (BEJ) and Cathay Pacific Airways (CAT) plan to launch their cargo joint venture (JV), an industry insider said. (BEJ) is expected to be the controlling stakeholder with a 51% stake while (CAT) will hold the remainder. (BEJ) plans to launch the venture based on the assets of its Air China Cargo subsidiary. To prepare, it increased its stake in the cargo company to 100% with the CNY718 million/$105 million purchase of Beijing Capital Airport Holding Company's 24% share last spring.

Air China Cargo was launched in 2003 with registered capital of CNY2.2 billion. It operates seven 747F freighters. (CAT) reportedly will provide an additional five or six 747Fs to the joint venture. (CAT) had 25 747Fs as of June 30, 2009, with a 26th operated by its Dragonair (DRG) subsidiary.

The new joint venture will be based in Shanghai in an effort to tap the Yangtze River Delta that is one of China's most vibrant economic regions. Shanghai Pudong ranked as the world's third-largest airport in traffic volume last year. (UPS) and (DHL) both operate hubs there.

(BEJ) signed a 10-year maintenance agreement with Collins Aviation Maintenance Services Shanghai Ltd, a Rockwell Collins (RC) joint venture, to provide service and support for (RC) equipment on the entire (BEJ) fleet. (RC) said "a corresponding avionics shop cooperation agreement was signed" with Ameco-Beijing to jointly support (BEJ)'s installed base of (RC) avionics equipment under a price-per-flight-hour program. The two agreements commenced on January 1. (RC) said it "plans to establish a global asset management capability in China in mid-2010 that will further support this agreement, as well as other asset-based programs."

Air China (BEJ) signed a purchase agreement with Airbus (EDS) for 20 A320s for delivery in 2011 to 2014, according to a filing with the Hong Kong Stock Exchange. The airplanes are worth $1.63 billion at list prices, but (BEJ) said it was afforded "significant price concessions." It said the new airplanes will support a new hub in Chengdu "and expand the fleet capacity of the company in southwestern China while supplementing, to an appropriate extent, the flights in eastern China." (EDS) confirmed that the contract covers airplanes that were part of the 2007 order from China Aviation Supplies Import and Export Group Corporation that were included in (EDS)'s 2008 order book.

2 737-89Ls (36751, B-5497; 36752, B-5500) and A321-213 (4180, B-6631), deliveries.

March 2010: Air China (BEJ) launches thrice-weekly, Beijing - Manila service on March 29.

Air China (BEJ) will boost its profile in the Pearl River Delta region by taking control of Shenzhen Airlines (SHZ) with a CNY682.1 million/$99.8 million investment that will see its stake in the country's fifth-largest carrier rise from 25% to 51%.

The Shenzhen municipal government will increase its share from 10% to 25% with a CNY348 million investment, and controlling stakeholder Li Zeyuan's 65% will fall to 24%, according to Air China
(BEJ)'s filing with the Hong Kong Stock Exchange and pending approval from Beijing.

Industry analysts expected (BEJ)'s takeover and have pointed out that the price undervalues Shenzhen (SHZ)'s shares. The airline has claimed it has been profitable for 16 consecutive years and said it was -CNY500 million in the black through the first 11 months of 2009.

But (BEJ) told a different story in its filing. It claimed that Shenzhen (SHZ) suffered a 2009 loss of -CNY863.7 million, which followed a 2008 deficit of -CNY31.3 million. A debt of CNY24.45 billion exceeded total capital of CNY22.39 billion, (BEJ) said. "Although Shenzhen (SHZ)'s current financial performance is not good, we still want to be its controlling stakeholder as we are confident of its prospects and the synergies that can be achieved between Shenzhen (SHZ) and us," (BEJ) explained in its filing.

Li Zeyuan, along with former Chairman, Li Kun, were placed under arrest for unspecified financial crimes recently, placing Shenzhen (SHZ)'s fate in question and allowing (BEJ) to step in.

Air China (BEJ) plans to deepen its cooperation with Shenzhen Airlines (SHZ), in which it plans to acquire a majority stake, through the April 8 launch of a shuttle service between Beijing (PEK) and Shenzhen (SZX). (BEJ)'s CNY682.1 million bid to increase its share in Shenzhen (SHZ) to 51% still awaits government approval. (PEK) - (SZX) is one of China's most profitable business routes. (BEJ) operates nine daily services, while (SHZ) operates six. China Southern Airlines (GUN), which plans to increase its presence at (SZX) in order to compete with the new Air China (BEJ)/Shenzhen Airlines (SHZ) alliance, also operates (PEK) - (SZX) six-times-daily.

(SHZ) transferred its (PEK) operation from Terminal 2 to (BEJ)'s Terminal 3 in order to facilitate the shuttle operation. (SHZ) Marketing Director, Zhu Yixin noted that the carriers will announce similar services on additional routes in the coming days. They also are discussing other areas of cooperation including code sharing and cargo. Through its impending takeover of (SHZ), (BEJ) will increase its share of the South China market to 43%. (GUN) holds 30%.

Boeing (TBC) announced that Air China (BEJ) and Air China Cargo (CAO) will expand their use of the Airplane Health Management (AHM) system for in-flight monitoring of 777s and 747-400s. The new contract adds 42 in-service and on-order airplanes to the 117 737s already covered. (BEJ) currently operates 10 777-200s and 10 747-400s while (CAO) flies seven 747-400Fs. (BEJ) was (TBC)'s first Chinese (AHM) customer.

Air China (BEJ) announced plans to raise more than >$953 million through a share issue. It will issue up to 585 million new "A" shares to "10 specific investors" at CNY9.58/$1.40 per share and 157 million new "H" shares to a subsidiary of parent company China National Aviation Holding priced at HK$6.62 per share ($0.85). The state-owned parent will subscribe directly to 157 million of the "A" shares for CNY1.5 billion. (BEJ) said the net proceeds from the "A" share issue will be CNY5.6 billion and will go toward working capital expenditure and its acquisition of a stake in Air China Cargo (CAO). Proceeds from the "H" share issue will be HK$1.04 billion, it said.

767-3Q8ER (30301), returned to (ILF), and leased to (GMG) Airlines.

April 2010: Air China (BEJ) posted a record profit of +CNY4.85 billion/+$711.5 million in 2009, significantly reversed from a net loss of -CNY9.26 billion in 2008, saying its fortunes were boosted by a growing domestic market and fuel hedge gains.

Revenue decreased -2.9% to CNY51.39 billion, while expenses plummeted -26.8% to CNY45.89 billion, owing to lower fuel prices. Passenger boardings rose +14.2% to 41.28 million. Traffic grew +9.8% to 75.47 billion (RPK)s, while capacity lifted +7.4% to 98.62 billion (ASK)s, producing a load factor of 76.5% LF, up +1.7 points. (RPK)s on domestic routes climbed +19.3%, while (RPK)s on international and regional routes declined -1.3% and -1.2%, respectively. Cargo traffic dipped -0.6% to 974,000 tonnes.

(BEJ) introduced 31 airplanes into its fleet last year, comprising 16 A320 family airplanes, 14 737-800s and one business jet and phased out four 737-600s, four 737-300s, one 767-300, two 767-200s and one 747-200. The carrier (excluding Air Macau (MCU)) operated a fleet of 262 airplanes as of December 31.

"We will undoubtedly face new challenges" in 2010, (BEJ) said in a statement. "The positive trends in the aviation industry will continue with the support of the recovering global economy. However, the rapid increase in domestic capacity and the growing optimism and expanded capacity of international carriers will further intensify competition in the Chinese aviation market. In addition, high-speed rail will begin to impact certain segments of the market, while fluctuations in oil prices and exchange rates will create further uncertainties in our operations." It expects to transport 46.8 million passengers this year.

737-89L (36753, B-5507) and A321-213 (4283, B-6633), deliveries.

May 2010: Boeing (TBC), along with Honeywell's (SGC) (UOP), United Technologies, and (AECOM), will work with Air China (BEJ) and PetroChina in a collaborative effort to establish a sustainable aviation biofuel industry in China as part of a broader sustainable aviation biofuel agreement between China's National Energy Administration and the USA Trade and Development Agency.

The strategic effort, which will promote the commercialization of aviation biofuels in China through the USA - China Energy Cooperation Program, is slated to begin in June and will look at all phases of sustainable aviation biofuel development including agronomy, energy inputs and outputs, life cycle emissions analysis, infrastructure and government policy support.

Air China (BEJ), PetroChina, Boeing (TBC) and Honeywell (SGC)'s (UOP) have agreed to conduct an inaugural flight using Honeywell (SGC) Green Jet Fuel, which already has been used for biofuel demonstration flights with Air New Zealand (ANZ), Continental Airlines (CAL), Japan Airlines (JAL), and (KLM) Royal Dutch Airlines.

Additional information, such as launch date and location, will be announced at a later date. The collaborations were announced at the joint opening of the Renewable Energy and Advanced Biofuel Forum in Beijing.

Air China (BEJ) appointed former (BEJ) President, Cai Jianjiang Chairman of Shenzhen Airlines (SHZ), signaling that its plan to take control of (SHZ) is coming to fruition.

An Air China (BEJ) A319 successfully completed a validation flight utilizing tailored Required Navigation Performance – Authorisation Required (RNP-AR) procedures at Ali Airport (one of the world’s highest airports) in the Tibetan Autonomous Region of China. The (RNP) validation flight is essential for the entry into service.

737-86N (36545, B-5508), (GEF) leased. A321-213 (4318, B-6665) delivery and A330-343 (1110, B-6511), AerCap (DEA) leased.

June 2010: Air China (BEJ), buoyed by a gradual rebound in international traffic owing to the economic recovery in Asia, is eyeing expansion. Managing Director International Affairs & Cooperation, Lou Yongfeng said that (BEJ) is encouraged by the success of recently started routes. "This year, we have opened two international routes. One is Shanghai - Chengdu - Bangalore and the other one is Beijing - Manila. So far, both routes are operating quite well with an average load factor of more than >75% LF," he said.

But he admitted that (BEJ)'s international ambitions currently are curtailed by a shortage of long-haul airplanes, forcing it to plan most of its expansion for next year and beyond. "We plan to [launch a number of new international routes] in the next few years, such as Beijing - Toronto, and to boost flight frequencies on other routes, such as Beijing - Madrid - Sao Paulo," he said. "We will introduce more than ten long-haul airplanes in the next [couple of years], mainly 787s and A330s."

(BEJ) is scheduled to take delivery of its first 787 in September or October of 2011. "We plan to operate the 787 on Sino - USA routes," Lou revealed. But he cautioned that it is uncertain whether its first 787 can be delivered on time.

He noted that some of (BEJ)'s European routes have become profitable this year, citing Beijing - Frankfurt in particular. "Also, we are narrowing our operating losses on USA routes," he said. He added that international growth in the second half of 2010 will be focused primarily on Africa via new code share accords with EgyptAir (EGP) and Ethiopian Airlines (ETH).

China's big three carriers plan to offer in-flight mobile phone service, according to the China Air Transport Association, which said the airlines signed a framework agreement with cellular technology development companies last year. Air China (BEJ), China Southern Airlines (GUN) and China Eastern Airlines (CEA) have submitted an application to the (CAAC) (CAC) seeking permission to offer in-flight mobile phone service but are still waiting for approval from the regulator. Passengers reportedly will be charged CNY15/$2.21 per minute to use the service, a proposed fee that has drawn complaints from some quarters in China as too high. In 2007, Shenzhen Airlines (SHZ) signed a contract with OnAir to equip its airplanes for in-flight mobile phone service, but the initiative was grounded when the (CAAC) declined to grant approval.

2 737-86Ns (36547, B-5509; 36548, B-5510), (GEF) leased, 2 A320-232s
(4317, B-6676; 4348, B-6677), AND A330-343 (1130, B-6513), (DEA) leased, deliveries.

July 2010: Air China (BEJ) is looking at combining Ameco Beijing, its successful Maintenance Repair & Overhaul (MRO) joint venture with Lufthansa (DLH), and its internal maintenance organization, Air China Engineering and Technics.

According to an industry insider,(BEJ) is having internal discussions about how the companies might be integrated but has not determined a specific plan. Ameco, which was created in 1989, is the oldest Joint Venture (JV) (MRO) organization in China, involving mainland and foreign participants.

(BEJ) holds a 60% stake, while Lufthansa (DLH) holds the remaining 40%. The (JV) agreement runs through 2029. Ameco provides (MRO) services for more than >80 domestic and international customers on various types of Boeing (TBC) and Airbus (EDS) airplanes.

Air China Engineering was launched in February 2004. Headquartered in Beijing, it mainly provides (MRO) services for (BEJ)'s fleet and has maintenance bases in Chengdu, Chongqing, Hangzhou, Tianjin, Shanghai, and Hohhot.

Air China (BEJ) finalizes order for 20 737-800s. (CFM) International said Air China (BEJ) selected (CFM56-5B)s to power 20 firm A320 airplanes scheduled to begin delivering in 2011. The agreement is valued at approximately $600 million including a long-term Rate Per Flight Hour maintenance agreement.

Aviation Partners Boeing (APB) announced orders from Air China (BEJ) for blended winglets. Delivery of Air China (BEJ)'s 30 737NG blended winglets will begin in 2011.

August 2010: Chinese carriers earned collective net income of +CNY5.52 billion/+$815 million for the month of July owing to robust domestic demand growth, according to the (CAAC) (CAC).

Air China (BEJ) said it earned net income of +CNY4.61 billion/+$677 million in the first half of 2010 owing to "the recovering global economy…[and] accelerated economic growth in China…[and] reasonable control of operating costs."

The six-month profit was up +60.3% over a net profit of +CNY2.92 billion reported in the year-ago period. Operating revenue jumped +53.1% to +CNY34.31 billion, while operating expenses rose +51.2% to CNY30.68 billion, owing to a significant increase in jet fuel prices. International jet fuel prices increased +41.3% year-over-year in the year's first half, while domestic jet fuel prices rose +34.5%, (BEJ) said. (BEJ) also noted it recorded a fuel hedge gain of CNY721 million for the six-month period.

Passenger boardings (including subsidiaries Air Macau (MCU) and Shenzhen Airlines (SHZ)) climbed +34.5% to 26.3 million, with an average load factor of 78.9% LF, up +4.6 points year-over-year. Capacity (ASK)s increased +24.5% to 59.85 billion, while traffic lifted +32.1% to 47.21 billion (RPK)s. Cargo volume grew +42.6% to 603,354 tonnes.

(BEJ) added 26 new airplanes to its fleet in the 2010 first half comprising mostly narrow bodies, including A321s and 737-800s, and retired seven older 767s and 747-200Fs. (BEJ) operated a fleet of 381 airplanes as of June 30.

Looking ahead, (BEJ) Chairman, Kong Dong said, "The global economy is expected to continue its recovery, while the domestic economy is expected to maintain a stable growth trajectory, providing favorable market conditions for Air China (BEJ)." But he also warned that challenges include the "possibility of a 'double-dip' in the global economy, the rise of high-speed-rail, oil prices, and fluctuations in exchange rates and interest rates.”

The country's airlines transported 25.5 million passengers in the month, up +21% over the year-ago month, producing a load factor of 83.6% LF, up +6.8 points, while cargo traffic volume climbed +23.6% to 445,400 tonnes.

Air China (BEJ) transported 3.6 million passengers on domestic routes in July, up +20.2% over the year-ago month, while its passenger boardings on international routes jumped +30.3% to 582,200. For regional routes, the figure rose +59.7% to 143,600. The (CAAC) (CAC) said China Eastern Airlines (CEA)'s July passenger boardings on domestic routes rose +52.8%, while passengers carried on international routes climbed +80.1% and on regional routes grew +74%.

Chinese carriers earned collective net income of +CNY10 billion in the first half of 2010.

Air China (BEJ) plans to launch a new Beijing-based business jet company in conjunction with the Beijing municipal government to compete with Hainan Airlines (HNA)’s subsidiary, Capital Airlines (DER), according to an industry insider.

(BEJ) is expected to sign a framework agreement soon with the municipal government and plans to hold a 51% stake in the new entity. (BEJ) already has a business jet subsidiary which launched in 2003 that operates a fleet of four airplanes including two G450s, one A318 and one Falcon 7X. Those assets will be taken over by the new company, which plans to introduce more airplanes next year.

(BEJ) is not the only Chinese carrier to join hands with the Beijing city government to explore the business aviation market. In May, Hainan launched Capital (DER) from the assets of its subsidiary business jet unit Deer Jet Company (DER). (HNA) holds a 70% stake in Capital (BTG), while the Beijing Tourist Group (BTG) holds the remaining 30%. (DER) currently operates 25 Airbus (EDS) airplanes and 24 business jets on more than >120 routes, giving it a 90% share of China's fast-growing commercial business aviation market.

The number of business jets operated in China totals fewer than <100 but experts believe the figure could rise to as high as 1,000 over the next decade.

September 2010: Air China (BEJ) announced that it has changed its order for 15 787-800s to 15 787-900s valued at $3.19 billion at list prices, according to a (BEJ) filing with Hong Kong regulators cited by multiple media outlets. The original order was placed in 2005.

(BEJ) has ordered 4 777-300ERs for delivery in 2012. (CHI) later finalized this order, valued at $1.1 billion. "This is a great day in the history of our long and enduring partnership with (BEJ)," said Boeing Commercial VP & Marketing, Marlin Dailey.

"The airplane's high efficiency and performance features will enable (BEJ) to launch more direct long-haul routes to meet the increasing demand of our passengers," said (BEJ) VP & CFO, Fan Cheng.

October 2010: Air China (BEJ) reported a net profit of +CNY5.17 billion/+$772 million in the third quarter, a better than fourfold increase over the +CNY885 million earned in the year-ago period.

(BEJ) credited the strong performance to "implementation of effective operating management, marketing and cost control initiatives," the global recovery and rapid economic growth in China. Operating revenue jumped +76.7% to CNY24.83 billion, while operating expenses climbed +44% to CNY 19.42 billion.

Capacity (ASK)s rose +47% year-over-year to 37.09 billion against a +54.2% increase in traffic (RPK)s to 30.58 billion. Passenger load factor was 82.4% LF, improved +3.8 points, compared with the same period in 2009.

For the nine months ended September 30, (BEJ) earned +CNY9.86 billion, up +159% over +CNY3.81 billion in the 2009 period.

Looking ahead, (BEJ) Chairman, Kong Dong noted, "We expect China's aviation industry to enjoy continued solid growth on the back of the global economic recovery and the steady acceleration of China’s economic growth which supports rising household spending power. So we will continue to execute our growth strategies to leverage market opportunities to enhance our capabilities and competitiveness."

China’s big three carriers all reported profits in the third quarter. China Eastern (CEA) earned +CNY3.16 billion and China Southern (GUN) netted +CNY3 billion.

737-86N (37886, B-5525), 737-89L (36755, B-5477) and 2 A321-213s (4472, B-6701; 4494, B-6711), deliveries.

November 2010: Air China (BEJ), including its Shenzhen Airlines (SHZ) subsidiary, is now code sharing on cross-Strait flights with Taiwan’s (EVA) Air, including its regional member Uni Air (MAK). The cities involved are Beijing, Chongqing, Hangzhou, Shanghai, Shenzhen, and Tianjin, all from Taipei (mostly Taoyuan airport but also the more conveniently located Songshan airport for flights to Shanghai’s own close-in Hongqiao airport). Soon Air China (BEJ)’s Shandong Airlines (SHG) unit will also join in, adding Taipei - Qingdao flights to the list. Though Air China (BEJ) and (EVA) signed an interline pact for Taiwan-mainland passengers traveling through Hong Kong or Macao as early as 1995, the new arrangement enables (EVA) to promote Taiwan as a connecting hub into and out of the mainland for North American passengers.

Boeing (TBC) and Air China (BEJ) said that the initial release of (TBC)’s Airplane Health Management (AHM) system is now active on 40 airplanes in the airline’s Next-Generation 737 fleet, providing information on the condition of airplanes during flight operations.

December 2010: Ethiopian Airlines (ETH) and Air China (BEJ) signed an agreement under which the carriers will code share on their 14 weekly services between Addis Ababa on the one hand and Guangzhou and Beijing on the other. (BEJ) announced its intent to reach an agreement with (ETH) back in June. Air China (BEJ) is a member of the Star Alliance (SAL) and Ethiopian (ETH) is in the process of joining. “The code share agreement strengthens (ETH)’s partnership with one of the global airlines in China, allowing passengers of both carriers to have wider choices of services between Asia and Africa,” (ETH) said.

(BEJ) will launch a thrice-weekly, A330-200 Beijing – Dusseldorf service March 27, becoming four-times-weekly on June 23.

China's Ministry of Commerce gave the green light for the air cargo joint venture (JV) between Air China (BEJ) and Cathay Pacific Airways (CAT), which is expected to launch by year end or early next year, according to (BEJ) Board Secretary, Huang Bin.

The (JV), which was agreed to in February, will create "Air China Cargo (CAO)." (BEJ) will hold a 51% stake in the new carrier while Cathay (CAT) will acquire a 25% stake and fund an offshore trust, in the form of a loan, to hold an additional 24%. (CAT)'s total investment in the new venture will be CNY1.67 billion/$25 million.

Air China Cargo (CAO) will operate seven 747F freighters. (CAT) will sell four 747-400Fs and two spare engines to the new airline. (CAO) also plans to transfer its main operating base to Shanghai Pudong. An insider at (BEJ) noted both carriers agreed that (CAT) will withdraw all its cargo business from China’s mainland market in three years so that the new (JV) can be better positioned in the mainland market. Air China (BEJ) is expected to buy out (CAT)’s belly freight service on all its flights to China’s mainland cities.

The new (JV) is expected to face competition as China Eastern Airlines (CEA) announced in October its new subsidiary cargo carrier— comprised of the assets of China Cargo Airlines (CKK), Great Wall Airlines (GWZ) and Shanghai Airlines Cargo (SHA) — will commence operations January 1 from its base in Shanghai.

737-89L (40015, B-5337) and A330-343E (1187, B-6523), deliveries.

January 2011: Air China (BEJ) has the largest and strongest international network of all Chinese carriers, along with leading positions in the capital Beijing and the centrally-located Chengdu. It has a strong presence in Shanghai, too, and has built a formidable presence in key southeastern cities like Shenzhen and Guangzhou by taking control of Shenzhen Airlines (SHZ). Its Star (SAL) Alliance membership, improving service and better scheduling are all contributing to big increases in premium and transfer traffic. Another big strategic asset is its close relationship with Cathay Pacific Airways (CAT).

(BEJ) will launch a second daily, Beijing - Los Angeles service on September 1 aboard a 747-400.

(BEJ) said it plans to operate a transpacific demonstration flight partially powered by biofuel in the second half of this year. (BEJ) is expected to use a 747 powered by Pratt & Whitney (P&W) engines on the test flight, and Boeing (TBC) has agreed to partner with (BEJ) to provide technical support. PetroChina will provide jatropha-based feedstock for the project. The flight would follow a number of biofuel test flights conducted by airlines worldwide, including Air New Zealand (ANZ), Continental Airlines (CAL), Japan Airlines (JAL) and TAM (TPR).

Lufthansa (DLH) plans to launch the world's first scheduled commercial passenger flights using biofuel in the first half of this year, with an (IAE)-(V2500)-powered Airbus A321.

March 2011: Air China (BEJ) posted a 2010 net profit of +CNY12 billion/+$1.83 billion based on international accounting standards, more than double net income of +CNY4.9 billion in 2009.

(BEJ) attributed the improved results to robust market demand generated by the global economic recovery, accelerated domestic economic growth, the Shanghai World Expo and the Guangzhou Asian Games.

Operating revenue soared +60.5% compared to 2009 to CNY82.49 billion, while operating expenses climbed +55.9% to CNY71.56 billion including a +66% increase in fuel costs to CNY24.1 billion.

Passenger boardings rose +45.4% to 60 million. Traffic increased +40% to 105.7 billion (RPK)s on a +33.9% lift in capacity to 132.1 billion (ASK)s, pushing load factor to 80% LF, up +3.5 points compared to 2009. Cargo traffic volume heightened +38.3% to 1.35 million tonnes.

As of December 31, 2010, (BEJ) operated a fleet of 282 airplanes, having added +30 and phased out -10 last year.

Looking forward, (BEJ) said it expects growth in both the world economy and China's domestic economy to continue to boost its financial performance. But Chairman, Kong Dong said, “The volatility of jet fuel prices [and] the uncertainties about interest rates and the foreign exchange rate will bring operational pressures and management challenges.” Kong added that the expansion of high speed rail “may affect some of our domestic markets.”

“In light of these opportunities and challenges ahead, we will continue to execute a prudent strategy, while actively seeking new areas for growth, improving the service quality and continuously increasing operational efficiency. Our ever-deepening strategic relationship with Cathay Pacific (CAT) will also produce even greater synergies,” Kong stated.

(BEJ) is expected to launch its business jet subsidiary, Beijing Airlines, in conjunction with the Beijing municipal government in April or May. The new joint venture (JV) will be set up based on the assets of (BEJ)’s wholly owned business jet subsidiary that was established in 2003. It operates a fleet of seven airplanes, comprising three G450s, one A318, one Falcon 7X, one G200 and one Challenger 605. (BEJ) noted it would introduce more airplanes this year.

The Beijing-based carrier will have a registered capital of CNY1 billion/$152 million. (BEJ) will hold an 80% stake, while the municipal government will hold the rest.

Beijing Airlines will face fierce competition from Hainan Airlines subsidiary Capital Airlines (DER), which was launched last year and operates 24 business jets. It has more than a >90% share of the Chinese business jet market.

China’s commercial business jet market is still quite small, comprising a fleet that is fewer than 40 airplanes. Industry analysts point out there is big growth potential owing to the rapid expansion of the Chinese economy. It is predicted that China may need 600 - 1,200 business jets in the next 10 years.

Air China (BEJ) said it plans to introduce more than >30 new airplanes this year, citing rapidly increasing market demand. (BEJ) said 8 to 10 of the new airplanes will be long-haul; it is accelerating international expansion and will launch its first route to Africa this year. (BEJ) pointed out that international flying accounts for 45% to 50% of its total revenue.

In addition, (BEJ) will allocate new airplanes to the Shanghai market, where it plans to boost capacity, opening more routes and increasing flight frequencies. (BEJ) said it will also phase out some of its older 737-300s this year.

In January, (BEJ) estimated its 2010 net profit at more than >CNY10 billion ($1.51 billion), doubling net income of CNY5.03 billion in 2009. (BEJ) revealed it would consider new fuel hedges if oil prices continue rising.

At the Hong Kong Airshow, Air China (BEJ) became the third customer for the 747-8I passenger airplane with 5 orders.

April 2011: Cathay Pacific (CAT) has increased its shareholding in Air China (BEJ) from 18.43% to 18.77% after acquiring 5.48 million shares for HK$40 million/$5.17 million.

Air China (BEJ) is pressing ahead with requiring its majority-owned subsidiary, Shenzhen Airlines (SHZ) to join the Star Alliance (SAL). The Star Alliance (SAL) is still evaluating (BEJ) and there is no specific timetable for a formal agreement.

(BEJ) formally joined the (SAL) alliance at the same time as Shanghai Airlines (SHA) at the end of 2007, but (SHA) terminated its membership last October following its merger with China Eastern Airlines (CEA). After (SHA)'s departure, the (SAL) alliance faced a reduction of its route network in China and is reportedly exploring ways to fill the void.

(BEJ) became the majority shareholder of (SHZ) when it increased its stake from 25% to 51% in March 2010, a move that enhanced (BEJ)’s position in prosperous South China. (SHZ)’s pending Star (SAL) alliance membership would help to fill the (SAL) alliance's network gap in China.

Most of (SHZ)'s routes are domestic; it operates four international routes from Shenzhen to Ho Chi Minh, Seoul, Osaka, and Kuala Lumpur. As of December 31, 2010, (SHZ) operated a fleet of 99 narrow bodies comprising five A319s, 38 A320s and 56 737s. " (BEJ) has decided to [gradually] open more international routes for Shenzhen Airlines (SHZ).

Air China (BEJ) will launch twice-weekly, Beijing - Munich - Athens A330 service on May 15.

737-89L (40032, B-5570), A320-232 (4566, B-6733) and A330-343 (1216, B-6530), deliveries.

May 2011: Air China saw earnings dip in the 2011 first-quarter compared to the year-ago period, despite strong revenue growth.

(BEJ) reported net income of +CNY1.67 billion/+$255.8 million, down -23% compared to a profit of +CNY2.17 billion in the March 2010 quarter. (BEJ) credited the “continuous growth of domestic market demand,” stimulated by the gradual recovery of the Chinese economy, for its profit. But (BEJ) cautioned, “The impact of the unstable political condition in North Africa, the earthquake in Japan and fluctuations in oil price have slowed down the growth of international traffic and cargo business.”

(BEJ)'s first-quarter revenue climbed +44.6% year-over-year to CNY21.25 billion, while operating expenses jumped +43.9% to CNY19.42 billion. Traffic rose +37.9% to 28.83 billion (RPK)s on a +36.7% lift in capacity to 36.35 billion (ASK)s, pushing load factor to 79.3% LF, up +0.7 point.

Looking ahead, (BEJ) Chairman, Kong Dong said he expects “greater room for growth this year generated by the continuous recovery of the global aviation industry, stable macroeconomic growth in China, and the increasing synergies with Cathay Pacific (CAT) and Shenzhen Airlines (SHZ).” But he warned, “Uncertainties still remain, such as sudden unexpected incidents, jet fuel price hikes, greater competition from high-speed railways and exchange rate fluctuations. We remain optimistic about the overall market this year yet will be prudent about our approach to business.”

The (CAAC) (CAC) has reported that Chinese carriers posted aggregate first-quarter net income of +CNY5.73 billion, up +31.8% over the year-ago period.

(BEJ) will launch thrice-weekly, A330 Beijing - Milan service on June 15.

The Chinese government raised domestic jet fuel prices to CNY7,640/$1,175 per ton, up +11.7% from CNY6,840 per ton in April, despite the decline of international oil prices since May. This is the third price hike this year. Fuel costs comprise more than >40% of Chinese carriers’ operating expenses. China Southern Airlines (GUN), which operates 80% of its flights on domestic routes, could see its fuel costs increase by +CNY2.11 billion annually owing to the change. Air China (BEJ) and China Eastern Airlines (CEA), which operate 70% of their flights on domestic routes, could see their annual fuel costs rise by +CNY1.79 billion and +CNY1.84 billion, respectively.

As a short-term solution, most Chinese carriers announced they have increased fuel surcharges on domestic routes. China’s big three carriers are reportedly considering restarting fuel hedging but first must receive government approval.

June 2011: Chinese carriers facing pressure from the Beijing - Shanghai high-speed train (HST) rail service scheduled to start this month, are slashing air fares and making other adjustments to remain competitive. The Beijing - Shanghai air route is popular with business travelers. With an average load factor of more than >85% LF, it is the most profitable city-pair for domestic airlines, including China Eastern Airlines (CEA) and Air China (BEJ), the route's two biggest carriers.

(BEJ) Chairman, Kong Dong has expressed concern about the Beijing - Shanghai high-speed train (HST) rail service, noting that the route "is our lifeblood." However, he said (BEJ) is responding by adjusting capacity, simplifying the boarding process, enhancing service levels and improving on-time performance.

(CEA) is taking a similar approach by implementing a series of measures, including simplifying the boarding process, coordinating with air traffic controllers to guarantee on-time performance and improving cabin service. (CEA) Managing Director, Ma Xulun predicted that the Beijing - Shanghai high-speed train (HST) service will reduce air passenger traffic by -15% to -20% initially but that traffic will recover in six months when the (HST) and airline customer groups stabilize.

In addition, both carriers are expected to switch from an A330 to an A320 on the route to maintain high load factors.

An interesting comment by a reader of the above "(HST) vs Airplane" (who signed his name as "Autolycus") follows:

"Train or airplane, which is better, A to B?

Trains: - They have few delays, run on rails, depart almost immediately after doors close, virtually unaffected by weather, comfy (depending on ticket) seats, no baggage restrictions or fees for excess weight, more room to move around during journey, quicker passenger throughput at terminals, no delay waiting for baggage at destination, higher security for and access to baggage during journey, no communication (phone/computer) connection issues - though quiet cars & network coverage will affect these. The final point to consider in the railway's favor is city center-to-city center journey times - which are usually quicker by rail.

Airplanes: They have a lot of catching up to do in terms of passenger comfort and convenience. This includes the unacceptable personal intrusions (particularly by ill-suited "security" apes at USA airports), exorbitant excess baggage - and now other - additional fees, overall journey time from A to B and the cramped cabin conditions in economy (Y) class.

Conclusion: As rail travel improves globally and air travel stagnates, airlines - and airports - are going to have to compete on an equal footing or lose passengers to well-catered, clean, high-speed, Mag-Lev, reliable railway systems . . . And watch the rush increase when first-class (F) rail travel includes a similar range of interactive In-Flight Entertainment (IFE) (perhaps that should be (IJE)), as are enjoyed by even "cattle-class" air travellers now . . .

What happens across China this month will spread across the world next year."

Air China (BEJ) launched seasonal, Chengdu - Tokyo Narita service.

(GE) Aviation (GEC) has been selected to deploy a Required Navigation Performance (RNP) program at Jiuzhai Huanglong Airport in the Sichuan province of China. The cornerstone of the program is a network of (GE)-designed (RNP) paths that will improve access and maximise operational efficiency for airlines serving the airport. This significant contract marks the first airport-sponsored (RNP) program implementation in China.

(GE), in coordination with the airport and the Civil Aviation Administration of China (CAAC) (CAC), will design and deploy highly-precise approach and departure flight paths with custom-engineered vertical paths for each of the eight (RNP)-capable airlines that operate to Jiuzhai. This will enable Jiuzhai Airport to provide a common (RNP) path for all airlines while giving each airline the best performance possible for their fleet-type. (GE) also will provide (RNP) operations approval support and validation for two launch airlines, Air China (BEJ) (A319) and China Eastern (CEA) (737-700), followed by operations approval and validation support for six subsequent airlines.

In total, (GE) will deploy (RNP) procedures and provide maintenance and support services for eight airlines, operating five different airplane types from three airplane families at Jiuzhai.

Furthermore, (GE) will cooperate with the (CAAC) to support the local establishment of expertise through a package of tutoring and on-the-job training to qualified (CAAC) procedure design personnel to demonstrate effective methodologies for designing and validating flight procedures. (GE) also is working with the airport to identify terrain obstacles north of the airport that currently limit aircraft operations. The (RNP) program will solve limitations presented by the obstacle, improving accessibility for the eight operators.

"This joint undertaking marks a significant milestone in airspace modernization efforts in China," said Giovanni Spitale, General Manager for (GE)'s Performance Based Navigation (PBN) Services. "(GE) is proud to work with such forward-thinking organisations around the world that are working toward a common goal of improving airplane and air traffic management (ATM) operations."

Jiuzhai Airport, located at 11,311 feet/3,448 meters in the Himalayan Mountains, is the third highest airport in China. Delays and diversions are common at Jiuzhai due to inclement weather and poor visibility. (RNP) procedures can be deployed at any airport enabling airplanes to fly very precise paths with an accuracy of less than a wingspan. This precision allows pilots (FC) to land the airplane in weather conditions that would otherwise require them to hold, divert to another airport, or even cancel the flight before departure.

"In order to improve operational efficiencies at Jiuzhai, it was essential to be able to offer this solution to not just one airline that serves the airport, but to all the airlines," said Yang Hong Hai, Director of Flight Operations Management Division, (CAAC) Flight Standards Department. "We are confident that this (RNP) program will improve both airline operations and passengers experience when flying to and from Jiuzhai."

Chinese airlines and the (CAAC) are working with (GE) to deploy (PBN) solutions that align with China's (PBN) Implementation Roadmap. Since 2004, (GE)'s (PBN) Services has completed 16 (RNP) (AR) implementations for four Chinese airlines at six airports.

"Air China (BEJ) first began flying (GE)-designed (RNP) paths in 2005 at Lhasa to improve access to the airport," said Captain Chen Dongcheng, Vice General Manager of Operations Quality & Management department of Air China (BEJ) Southwest branch. "Since then, we have deployed (RNP) with (GE) at five other Chinese airports, improving access, schedule performance and lowering fuel usage. We are pleased to now be able to take advantage of similar benefits at Jiuzhai."

"Our daily operations into Lhasa and Yushu have improved significantly since deploying (RNP) in 2009," said Captain Zhao Jinyu, VP of China Eastern Airlines (CEA). "It's crucial to our business and to the communities we serve to provide consistent, reliable flights - - and (RNP) helps ensure this is possible."

(RNP) procedures, an advanced form of (PBN) technology, are very precise flight paths that can be designed to shorten the distance an airplane has to fly en-route, and to reduce fuel burn, exhaust emissions and noise pollution in communities near airports. Because of (RNP)'s precision and reliability, the technology can help air traffic controllers reduce flight delays and alleviate air traffic congestion. (GE) has designed and deployed more than >345 (RNP) flight paths around the world since 2003.

(BEJ) has ordered 5 747-8Is, which are conditional on government approval.

July 2011: The (CAAC) (CAC) gave a green light to Air China (BEJ) to launch Dalian Airlines (DLN), which is expected to enhance (BEJ)'s position in North China.

According to the (CAAC), (DLN) the Dalian-based carrier has a registered capital of CNY1 billion/$154.5 million. (BEJ) is the controlling stakeholder with an 80% holding. (BEJ) invested CNY800 million, while the Dalian Baoshui Zhengtong Company put forward CNY200 million to take the remaining 20% stake.

(BEJ) last year signed an agreement with the Dalian government to launch Dalian Airlines (DLN). Hainan Airlines (HNA) had previously reached an accord with the local government to start a Dalian-based airline, but disagreements unraveled that deal and opened the door for (BEJ).

According to a cooperative agreement between (BEJ) and the Dalian government, the new airline is expected to launch international service to South Korea and Japan as well as operating a number of domestic routes. It is expected to use 737-800s.

Air China (BEJ) invested CNY86.8 million/$13.5 million to take a 31% stake in Lhasa-based start-up Tibet Airlines (TBZ), which officially launched operations this month. The move is part of (BEJ)'s continued expansion into West China.

(BEJ) purchased the stake from the Tibet Autonomous Region Investment Company, which originally held 51%. (BEJ) also sent pilots (FC), cabin crews (CA) and technicians (MT) to (TBZ) for its formal launch.

Tibet Airlines (TBZ) currently operates one A319 on routes from Lhasa to Ali, Chengdu and Chongqing. Two additional A320s are slated to be added to the fleet in August and September. It plans to expand its fleet to 20 airplanes in the next five years.

(TBZ) expects to open a new route to Beijing at year end and eventually hopes to operate international routes.

Air China (BEJ) subsidiary, Shenzhen Airlines (SHZ) signed a Memo of Understanding (MOU) with the Star Alliance (SAL) and is expected to formally join the global airline grouping in the second half of 2012.

Parent, Air China (BEJ) said that (SHZ)’s Star Alliance (SAL) membership will help (SHZ) attract more transfer passengers. It noted that (BEJ) reported CNY1.75 billion/$270.3 million in additional operating revenue in 2010 through its cooperation with (SAL) member carriers.

(SHZ) President, Feng Gang pointed out that being a (SAL)) Alliance member will enable (SHZ) to further explore the international market. (BEJ) Chairman, Kong Dong said that (SHZ) plans to launch more international routes. To accommodate the new routes, (SHZ) is scheduled to expand its fleet from 100 airplanes currently to 171 by 2015. (SHZ) is slated to introduce 19 new airplanes while phasing out nine airplanes this year.

(SHZ)’s membership will also enable the Star (SAL) Alliance to enhance its position in prosperous South China. Addressing the (SAL) Alliance’s weak representation in the Shanghai market, Kong said that Air China (BEJ) would try to overcome a “slot shortage” at Shanghai Pudong by allocating more long-haul airplanes for international flying. It also plans to boost flight frequencies from Shanghai Hongqiao over the next five years.

(SHZ) will add five new destinations to the (SAL) Alliance’s network in China: Juzhou (Zhejiang Province), Linyi, Qinhuangdao, Shijiazhuang, and Zhoushan.

(BEJ) joined the (SAL) Alliance in December 2007; Shanghai Airlines (SHA) withdrew from the (SAL) Alliance in October 2010 to pave the way for it to join the SkyTeam (STM) Alliance with parent company, China Eastern Airlines (CEA) last month. China Southern Airlines (GUN) joined the SkyTeam (STM) Alliance in November 2007.

1st delivery of 777-300ER to Air China (BEJ) of 19 orders. With this delivery, Boeing (TBC) is scheduled to deliver an additional three 777-300ERs to Air China (BEJ) by the end of 2011. (BEJ) will use the airplanes for route expansion, including direct routes to Frankfurt, London and Paris, as well as for gradual replacement of the 747-400s currently serving North American routes. (BEJ) owns 158 Boeing (TBC) airplanes, making up 60% of its fleet.

August 2011: Air China (BEJ) reported a first-half net profit of +CNY4.06 billion, down -13.4% compared to +CNY46.94 billion in the year-ago period. (BEJ) blamed the dip on “continuous depression of the western economy,” “unstable political situation in North Africa” and “surging fuel prices,” although (BEJ) said domestic market demand stimulated by the fast-growing Chinese economy supports stable growth.

In addition, fuel hedge gains were reduced by -88.9% to CNY80 million, owing to soaring fuel prices. Investment gains from the cross shareholding deal with Cathay Pacific Airways (CAT) decreased by -30.2% to CNY484 million. (CAT) owns about 19% of (BEJ), while (BEJ) owns 30% of (CAT).

Operating revenue increased +31.6% to CNY45.1 billion for the first half, while operating expenses climbed +32.9% to CNY41.2 billion. Passenger traffic climbed +33.6% to 28.8 million with an average load factor of 82.4% LF, up +4.35 points over the year-ago period. (RPK)s jumped +37.8% to 40.12 billion on domestic routes and (ASK)s increased by +30.5% to 48.7 billion. Cargo traffic boosted +4.8% to 570,400 tonnes.

Looking forward, (BEJ) is taking a more cautious outlook based on economic conditions and has adjusted its 2011 traffic goal to 68.7 million passengers and 1.6 million tonnes of cargo traffic.

September 2011: The Chinese government provided Air China (BEJ) with a CNY1 billion/$156.7 million capital injection to allow (BEJ) to increase its holding in Cathay Pacific Airways (CAT), according to a statement from (BEJ) released by the Shanghai Stock Exchange.

(BEJ) and (CAT) established a cross-shareholding deal in 2006. The most recent investment made by (BEJ) in (CAT) was CNY6.34 billion in 2009 to expand its stake to 29.99%, making (BEJ) the second-biggest (CAT) shareholder.

State-owned (BEJ) received CNY1.5 billion from the government in January 2010 to help it reduce its debt ratio.

China Airlines (CHI) on September 21 ends its frequent flyer program bilateral cooperation with Air China (BEJ), and on Septembger 28 will terminate its frequent flyer program bilateral cooperation with Hainan Airlines (HNA), including Hong Kong Airlines (CRY) and Hong Kong Express (HKE).

October 2011: Air China (BEJ) reported a third-quarter net income of +CNY3.8 billion/+$597 million, down by -26.5%, compared to +CNY5.17 billion in the year-ago quarter.

(BEJ) blamed the profit drop on the “ongoing economic instability in Europe and the USA,” plus fluctuations in oil prices, which have “slowed down the growth of international traffic and cargo business.”

Revenue increased by +13.4% to CNY28.14 billion, while expenses rose +20.3% to CNY23.36 billion owing to rising fuel costs. (RPK)s climbed +8.94% to 33.31 billion on an increase of +6.1% in capacity to 39.36 billion (ASK)s, producing a load factor of 84.7% LF, an increase of +2.21% points compared to the year-ago period. (RFTK)s declined by -1.63% to 1.23 billion against a boost in capacity of +1.58% to 2.05 billion (AFTK)s.

(BEJ) also earned a net income of +CNY7.863 billion for the first nine months, down by -20.3% from +CNY9.86 billion year-over-year. (BEJ) cited “the reduction of fuel hedge gain and investment gain (from Cathay Pacific Airways (CAT))” for the result.

(BEJ), Boeing (TBC) plus Chinese and USA aviation energy partners conducted China’s first sustainable biofuel flight, a two-hour maintained flight in a 747-400 from Beijing Capital International Airport using biofuel sourced in China.

PetroChina, working with Honeywell (SGC)’s (UOP), sourced and refined the China-grown, jatropha-based biofuel aboard the 747, which was powered by Pratt & Whitney engines. China National Aviation Fuel blended the biofuel with traditional jet fuel and also provided airplane fueling support.

Air China (BEJ) and Boeing (TBC) are working on plants for an international flight between the USA and China fueled by sustainable biofuel.

777-39LER (38667, B-2086), A320-214 (4900, B-6822), ex-(D-AVVI), A321-232 (4873, B-6823), ex-(D-AVZA), and A330-243 (1260, B-6536), ex-(F-WWYY), deliveries.

November 2011: Former (CAAC) (CAC) Vice Minister Infrastructure Investment & Finance, Wang Changshun was appointed to replace the retiring Kong Dong, Chairman Air China (BEJ), as General Manager of (BEJ) parent, China National Aviation Corporation. Wang previously served with Xinjiang Airlines (XIJ) and China Southern Airlines (GUN), and was a Deputy Director at the Civil Aviation Administration of China (CAC).

Air China (BEJ) launched its first live trial of Gogo’s in-flight entertainment (IFE) system and intra-cabin connection service on a 737-800 Beijing - Chengdu route, becoming the first Chinese airline to provide passengers with free in-flight entertainment.

(BEJ) said it would continue the trial flights through December 31 and plans to promote this service on its A321 Beijing - Shanghai route soon.

(BEJ) also teamed with state-run telecom carrier, China Telecom to explore the possibility of allowing the use of cell phones and Internet service on its airplanes. (BEJ)’s goal is to provide broadband Internet access on all flights, which is expected to take place early next year.

Hainan Airlines (HNA) and Shenzhen Airlines (SHZ) also plan to provide Internet service on domestic flights but have not yet received (CAAC) (CAC) approval, citing safety concerns.

737-89L (40030, B-5621), delivery.

December 2011: Air China (BEJ) launched daily, Beijing - Lhasa A319 service on December 15.

Next spring, Air China (BEJ) will re-start its nonstop flights between Shanghai and Paris with competition from the Skyeam (STM) Alliance airlines AirFrance (AFA) and China Eastern (CEA). Presently, it only flies to Paris from its Beijing base.

(AMECO) Beijing has begun to provide the Nitrogen Generation System (NGS) modification on a 777. The (FAA) and (EASA) have mandated that all registered airplanes must install (NGS) by December 2017 and September 2022, respectively. Separately, (AMECO) announced it has become the first in China's Civil Aviation Industry to install in-flight (WLAN) on an Air China (BEJ) 737-800.

December 2012: 737-89L (40031, B-5622), delivery.

January 2012: Amsterdam-based SkyNRG finished 2011 on a high note by partnering with Thai Airways (TII) to conduct what was called “the first passenger biofuels flight in Asia” in late December (Air China (BEJ) flew a biofuel demonstration flight in October without paying passengers). The (TII) flight from Bangkok to Chiang Mai included a 777 with both engines running on a 50-50 fuel mix of bio-jet fuel derived from used cooking oil and conventional petroleum-based jet fuel. As we’ve seen before with these “first” flights, (TII) airline officials said the flight marked the beginning of a collaborative effort to develop a bio-jet fuel supply chain in Thailand. For SkyNRG, which sourced the fuel, this flight followed similar flights
by AirFrance (AFA), Alaska (ASA), Finnair (FIN), (KLM) and Thomson Airways (ATZ)/(TFY), all since July, when bio-jet fuel became standardized.

In their search for commercially viable bio-jet fuel, airlines are leaving no stone unturned in Australia. Lufthansa has signed an agreement with the Perth-based biofuel company Algae.Tec. The plan is to “jointly evaluate the potential” of Algae.Tec’s algae-based crude oil as a low-carbon jet fuel source. Meanwhile, Air New Zealand (ANZ) and Virgin Australia (VOZ) signed similar agreements with the Sydney-based biofuel company Licella, which has technology to convert a range of waste plant material, such as sawdust, corn stalks and sugar cane waste, into bio-jet fuel.

Air China (BEJ) launches Chengdu to Kathmandu, Nepal. It will soon have flights from Beijing to Copenhagen and London Gatwick, plus from Shanghai to Paris (CDG). It is also upgrading its Beijing - Paris (CDG) flights to larger and newer 777-300ERs.

The Chinese government has given Air China (BEJ) a CNY50.7 million/$8.04 million capital injection for (BEJ)’s sustainable development.

According to a (BEJ) statement released by the Hong Kong Stock Exchange, the funds will be used to install winglets on its fleet and improve fuel efficiencies of its airplane engines.

It is the first time the Chinese government has funded (BEJ)’s environment protection efforts. Because of volatile fuel prices and the European Union Emissions Trading Scheme (EU ETS) that was implemented January 1, Chinese carriers are aiming to reduce their carbon emissions -22% by 2020 compared to 2005 levels.

(BEJ) said it was taking the lead among Chinese airlines to become the "more environmentally friendly carrier." In October, it became the first Chinese carrier to conduct a biofuel demonstration flight, operating a Boeing 747-400 with Pratt & Whitney (PW4000) engines partially powered by jatropha-based fuel. (BEJ) has also ordered more fuel-efficient airplanes, including the 787 and 747-8.

Air China (BEJ) will debut its 777-300ER on February 1, on the Los Angeles (LAX) - Beijing (PEK) night flight, replacing a 747-400. (BEJ), which is the only carrier to provide nonstop service between the two cities, doubled the daily service in September. It will go one step further to enhance the route in June, when it plans to upgrade the 747-400 day flight between (LAX) and (PEK) to the 777-300ER.

"With its numerous performance enhancements in the range and payload capabilities, the 777-300ER is the perfect airplane for the Los Angeles - Beijing route,” Air China (BEJ) VP & General Manager North America, Zhihang Chi said. “The upgrade enhances Air China (BEJ)'s advantage in the highly competitive Los Angeles market.”

The airplane’s three-class configuration includes 8F first-class suites, 41C lie-flat business-class seats and 259Y economy seats. Personal power outlets are available in all three cabins, (BEJ) noted.

Beginning later this year and in early 2013, (BEJ) expects to upgrade its 747-400-operated New York and San Francisco routes to 777-300ER airplanes. Boeing (TBC) delivered the first 777-300ER to (BEJ) in July, the first of an order for 19.

(BEJ) launched 2X-weekly, Chengdu - Kathmandu A319 service on January 5.

Jade Cargo International (JDC) announced it has “temporarily suspended” all operations due to “overall weak demand.”

In a December 31 statement on its website, (JDC) said the suspension “will also provide the shareholders with an opportunity to coordinate with stakeholders to continue with the restructuring of the company’s financial structure.”

According to several German media outlets, (JDC) will ground its fleet of six 747-400ERF freighters and does not have enough money to buy fuel.

Jade (JDC), which was founded in October 2004 as a joint venture (JV) between Shenzhen Airlines (ZHZ) (51%), Lufthansa Cargo (LUB) (25%) and the German development finance institute (DEG) (24%), has faced continuous financial difficulties. According to reports, Air China (BEJ) (which took over (ZHZ)) is considering selling its 51% share.

(LUB) Chairman & (CEO), Karl Ulrich Garnadt said in November that (JDC) "would not survive" a massive market downturn in its current fiscal state and was considering selling its holding.

(AMECO) Beijing completed business-class (C) modifications of 16 Air China (BEJ) A330-200s. It will begin cabin upgrades on (BEJ)'s 777 fleet this summer. (AMECO) Beijing announced that its (AMECO) Chongqing station and Guangzhou station will provide comprehensive line maintenance service for (KLM) Royal Dutch Airlines 747F cargo airplanes.

Rishworth Aviation is a flight crew (FC) leasing firm recruiting pilots for a large number of client airlines on various airplane types including most Boeing (TBC) and Airbus (EDS) airplanes, ATR and many more. This month, Rishworth Aviation is recruiting for pilots (FC) for Air China (BEJ) - A330 Captains (FC). Application information and position details are available online at http://www.rishworthaviation.com. Also see FltOps.com and FAPA.aero.

737-79L (41091, B-5296), A320-214 (4985, B-6846), A321-232 (5425, B-8961), and A330-243 (1282, B-6540), deliveries.

February 2012: The Chinese government has raised domestic jet fuel prices to CNY7,465/$1,186 per ton, up +1.43% from CNY7,360 per ton in January, dealing another blow to Chinese carriers that have already suffered from a decline in domestic market demand and air fares following the Chinese Spring Festival.

Air China (BEJ) will launch 4X-weekly, Shanghai - Chengdu - Mumbai A319 service on May 2.

This is the first fuel price hike this year. In January, the Chinese government cut domestic jet fuel prices by -3.83%. Since July 2011, Beijing has made monthly adjustments to domestic fuel prices based on fluctuating international fuel prices.

Fuel costs comprise more than >40% of Chinese carriers’ operating expenses. China Southern Airlines (GUN), which operates 80% of its flights on domestic routes, could see its fuel costs increase by +CNY273 million annually. Air China (BEJ) and China Eastern Airlines (CEA), which operate 70% of their flights on domestic routes, could see their annual fuel costs rise by +CNY234 million and +CNY242 million, respectively.

Despite the increase of domestic fuel price, Chinese airlines cannot raise fuel surcharges to offset rising fuel costs.

China has prohibited its airlines from participating in the (EU) Emission Trading Scheme (EU ETS), escalating the row over the new and controversial carbon emissions tax. According to a "Reuters" report, the Chinese government’s State Council issued a statement on its website that said Chinese carriers were prohibited from participating in (EU ETS) without government approval, and they were also barred from using (ETS) as a reason to raise fares.

The Association of Asia-Pacific Airlines (AAPA) Director General, Andrew Herdman told "Reuters" the ruling put Chinese carriers in a difficult position because they have to comply with (EU ETS), or risk large fines, while also being told by their government that they must not comply. “We’re now at the stage that it’s absolutely clear that a whole host of foreign governments are not going to allow the (EU) to do this,” Herdman said.

Chinese carriers are supporting Beijing’s decision to prohibit its airlines from participating in the European Union Emissions Trading Scheme (EU ETS), while still reserving the right to file a lawsuit.

“We are quite supportive of our central government’s decision and we think the real solution should be a global approach through [ICAO],” China Eastern Airlines (MU) Chairman, Liu Shaoyong said. He emphasized that domestic carriers are reserving the right to file a lawsuit against the (EU ETS).

China Air Transport Association (CATA) Director General, Wei Zhenzhong said that “Beijing’s decision reflects Chinese carriers’ wishes and also is quite helpful to protect the real interest of domestic airlines and air travelers.” (CATA) estimates operating expenses of Chinese carriers will increase by +CNY800 million/+$127.2 million annually because of (EU ETS). Air China (BEJ), which operates the most European routes, is expected to see the largest rise in expenses (+CNY200 million). (CEA) is expected to follow at +CNY100 million.

Expenses associated with the (EU ETS) are predicted to keep rising as Chinese carriers open more international routes to Europe to compete with the high speed rail. This year, (BEJ) is scheduled to launch service from Shanghai - Paris and China Southern Airlines (GUN) plans to open a Guangzhou - London route.

Wei said that Beijing’s decision was just the first step in the escalating row over the new controversial carbon emissions tax, as Chinese carriers will most likely be suspended from flying to Europe, a consequence of “not joining (EU ETS).” As a result, the Chinese government is considering counter measures against the (EU ETS) with Russia, India, Brazil, and other countries.

The Civil Aviation Administration of China (CAAC) (CAC) has granted approval for China Eastern Airlines (CEA) to a launch a business jet aviation company based on the assets of subsidiary, China Eastern Airlines Executive Air (CEAEA).

(CEAEA) was established in 1995 as a ground handling company for business jets. The new entity would operate five airplanes and is expected to expand its fleet to 10 this year, according to (CEAEA) Managing Director, Wang Taiping.

All major Chinese carriers have been exploring the burgeoning business jet aviation market in China.

Hainan Airlines (HNA) operates Beijing-based, Deer Jet Company (DER) and the Shanghai Deer Jet Company. Air China (BEJ) established Beijing Airlines in conjunction with the Beijing municipal government in April 2011 to enhance its position in the fast-growing domestic business jet aviation market. China Southern Airlines (GUN) and subsidiary, Xiamen Airlines (XIA) also plan to launch business jet aviation companies.

Deer Jet (DER) (CFO), Cao Yongtao said it is not easy for domestic business jet aviation companies to make a profit initially because of the many policy and financial hurdles “such as very high tax.” It is reported that Beijing levies a 22.85% tax to the general aviation industry, which means that business jet aviation companies must pay more than >20% tax on each business jet.

(BEJ) has awarded an Information Technology (IT) contract to SITA to handle its network communications globally.

Lufthansa Technik (DLH) (LTK) recently completed a five-year, $120 million expansion program at (AMECO) Beijing, where its hangar is capable of hosting four A380s simultaneously.

777-39LER (38675, B-2089), delivery.

Air China (BEJ) has taken delivery of an A321-200 on February 29, as part of its re-fleeting and investment program. This airplane is part of a mandate to finance six A321-200s under a French optimized lease structure combined with an (ECA) loan, with Natixis as arranger of the French lease structure and (ECA) agent and (KfW) IPEX-Bank and Natixis as arrangers of the (ECA) debt.

March 2012: Air China (BEJ) reported a net profit of +CNY7.082 billion/+$1.12 billion for 2011, down -41% from +CNY12 billion in the year-ago period.

Operating revenue climbed +19.3% to CNY 98.41 billion, while operating expenses jumped +29% to CNY92.15 billion due to rising fuel expenses, which increased by +44% to CNY34.7 billion.

(BEJ) also cited “intensified domestic and international competition” that led to the “continuing recession in the international air passenger market and significant decline in air cargo operations” as reasons for the decline.

Traffic (RPK)s climbed +16.85% to CNY123. 5 billion against a lift of +14.8% in capacity (ASK)s to 151.59 billion. Passenger boardings rose +16.14% to 69.69 million with an average load factor of 81.5% LF, up +1.4 points over 2010. (RFTK)s increased +0.14% to 4.8 billion, while (AFTK)s grew +4.22% to 8.2 billion.

Air China (BEJ) relaunched its service connecting Shanghai Pudong (PVG) and Paris Charles de Gaulle (CDG) airports on 10 March. More than four years after it was first dropped in January 2008, the French capital returns as Air China’s third European destination served out of Shanghai, after Frankfurt and Milan Malpensa. The five-weekly flights will be operated using A340-300 equipment, seating 255 passengers in a three-class configuration. (BEJ) will face competition from both AirFrance (AFA) and China Eastern (CEA), which provide 12 and seven weekly services respectively. Shanghai is the second Chinese market, after Beijing, in which (BEJ) offers non-stop services to France.

In 2011, (BEJ) introduced 57 airplanes and phased out 20 airplanes. As of December 31, 2011, (BEJ)’s fleet comprised 288 airplanes with the average age of 6.77 years.

Looking ahead, (BEJ) Chairman, Wang Changshun expects a “tougher 2012” owing to weak economic growth in the USA and Europe, acceleration of Chinese economic structural adjustment and shortages of various resources, including airspace, slots, infrastructure and higher costs pressure, although China still maintains stable growth to provide new opportunities for the domestic airline industry.

(BEJ) plans to retire its remaining two 767-300s from scheduled passenger by the end of this month. The airplanes are currently based at Beijing Capital airport (PEK) and have most recently been used on domestic routes with high demand to destinations such as Guangzhou Baiyun airport (CAN), Nanjing Lukou International airport (NKG), Shanghai Hongqiao International airport (SHA), Shenzhen Bao'an International airport (SZX) and Xi'an Xianyang International airport (XIY).

April 2012: Air China (BEJ) and China Southern Airlines (GUN) saw their first-quarter income plunge due to high fuel prices and the slowing of yuan appreciation, according to carrier statements released by the Shanghai Stock Exchange.

(BEJ) reported first-quarter net income of +CNY239 million/+$37.8 million, down -85.7% over +CNY1.67 billion in the year-ago quarter. Operating revenue increased +7.7% to 22.9 billion against an increase of +16.9% in operating expenses to CNY22.71 billion.

(GUN) posted a first-quarter net income of +CNY319 million, down -74.2% from +CNY1.23 billion in the same quarter of last year. Operating revenue climbed +15.5% to CNY23.7 billion, while operating expenses jumped +23.8% to CNY23.4 billion.

Industry analysts also cited market demand slowdown as the main reason for the results.

China Eastern Airlines (CEA) earlier predicted its first-quarter profit will drop by more than half from CNY1.01 billion reported in the year-ago quarter, citing similar reasons.

Beijing airport (PEK) which handled over 77 million passengers in 2011, is the busiest airport in the region and second place in the world’s ranking (just behind Atlanta). “The other four airports in the region with the most passenger traffic are Tokyo Haneda airport (HND), Hong Kong airport (HKG), Jakarta airport (CGK) and Dubai airport(DXB).”

Freight traffic in the region, on the other hand, did not fare as well, recording a decrease of -1.5% compared to 2010. “Hong Kong airport (HKG) continued to be the busiest cargo airport in the world, closely followed by Memphis airport (MEM) and Shanghai Pudong airport (PVG). The other three busiest airports in the region with the highest freight traffic are Seoul Incheon airport (ICN), Dubai airport (DXB) and Tokyo Narita airport (NRT).”

May 2012: On 12 May, Air China (BEJ) launched a new route connecting Beijing (PEK) and Yangzhou-Taizhou (YTY) airport in central Jiangsu province on the northern bank of the Yangtze River. The Star Alliance (SAL) airline now offers daily frequencies to this brand new airport, which was inaugurated only days before, on 7 May.

Air China (BEJ) has launched its business jet subsidiary, Beijing Airlines after a one-year trial operation to enhance its position in the fast-growing domestic business aviation market. The new venture received its air operating certificate (AOC) from the Civil Aviation Administration of China (CAAC) (CAC) in April 2011 and started trial operations the following July with a registered capital of CNY1 billion/$157.4 million.

(BEJ) holds a 51% stake, Beijing Enterprises Group Company and Beijing State-Owned Assets Management Company each hold an 18% stake, and Zhongda Yinrui Investment Company has a 13% ownership in the new airline.

According to Chairman, Fan Cheng, the new carrier reported a 2011 net income of +CNY18.9 million and an operating revenue of CNY59.6 million. The Beijing-based airline has 11 business jets in its fleet.

Embraer (EMB) predicts China will need 470 business jets worth $14.3 billion by 2020.

All major Chinese carriers have been exploring the burgeoning business aviation market in China. The new venture is expected to face fierce competition from Capital Airlines (DER), the Beijing-based business jet subsidiary of Hainan Airlines (HNA) launched with the assets of Deer Jet (DER) in May 2010.

Air China (BEJ) plans to launch a new airline with the Inner Mongolian government to expand its domestic market share, according to (BEJ) Chairman, Wang Changshun.

Wang said (BEJ) will be the controlling stakeholder of the new entity, which will be based on the assets of (BEJ)’s branch company in the Inner Mongolian region. The new carrier is subject to Civil Aviation Administration of China (CAAC) approval.

In recent years, China’s big three carriers ((BEJ), China Eastern Airlines (CEA) and China Southern Airlines (GUN)) have forged closer cooperative relationships with local governments.

(BEJ) has launched Dalian Airlines (DLN) and business jet subsidiary, Beijing Airlines with local government support. (CEA) received cash injections from the Yunnan and Wuhan provincial governments to relaunch their branch companies in these two provinces. (GUN) is negotiating with the Henan provincial government to raise stakes in (GUN)’s Henan subsidiary, Zhongyuan Airlines (ZHO).

The Chinese government has cut domestic jet fuel prices to CNY7,932/$1,257) per ton, down -1.6% from CNY8,061 per ton as international fuel prices keep fluctuating.

This is the second time the Chinese government has reduced domestic jet fuel prices this year. Beijing cut domestic fuel prices -3.8% to CNY7,360 per ton in January from CNY7,653 per ton in December. The Chinese government has raised fuel prices three times this year.

Fuel costs comprise more than 40% of China’s big three carriers total operating expenses, so it is expected the reduction will give some relief to Chinese carriers.

China Southern Airlines (GUN), which operates 80% of its flights on domestic routes, could see its fuel costs decrease by -CNY335.4 million annually. Air China (BEJ)) and China Eastern Airlines (CEA), which operate 70% of their flights on domestic routes, could see their annual fuel costs reduce by -CNY287.26 million and -CNY297.2 million, respectively.

Boingo Wireless has launched Wi-Fi services at Beijing Capital International Airport (PEK), through an agreement with Newbridge Technologies. It has also launched Wi-Fi services at Phuket International Airport, through an agreement with WLANNet.

Air China (BEJ) has signed lease agreements with Air Lease Corporation (ALE) for nine new 737-800s and four new A321-200s. The airplanes are each under 12-year lease terms and will be delivered in 2013 and 2014.

(ALE) delivered two new A330-200s to (BEJ) on long-term leases during the second half of 2011.

(BEJ) has been expanding via the launch of new airlines, most recently announcing plans to launch an airline in cooperation with the Inner Mongolian government.

June 2012: JetBlue Airways (JBL) and Air China (BEJ) have announced an interline partnership connecting their networks at New York (JFK) and Los Angeles (LAX), California, and (BEJ), a carrier based in the rapidly expanding Chinese market. If approved by the government, (BEJ) this fall will place its code on (JBL) flights.

(JBL) President & (CEO), Dave Barger said the Chinese market “continues to be a key portion of the global economy, and so we look forward to connecting business and leisure travelers between both of these well-developed networks."

(BEJ) President & (CEO), Jianjiang Cai said the partnership “will strengthen both our networks and benefits travelers of both countries."

The Boeing Company (TBC), in cooperation with Air China (BEJ) and PetroChina, will press ahead with a second test flight that will be partly powered by plant oil, company executives said. The test, scheduled for the third quarter of this year, is likely to involve a trans-Pacific trip, far longer than the one-hour test flight that was conducted in China last October, said Stephen Emmert, Boeing (TBC)'s Regional Director of the Biofuel Strategy team for China and North America.

The project aims to prove that a China-produced biofuel works, and to ensure "regulators and airlines around the world are comfortable using it for commercial flights," he said.

The planned test, like last year's, will involve use of a biofuel produced by PetroChina (601857.SS) from locally grown jatropha, a thorny green shrub. Jatropha based fuel, produced with oil extracted from seeds, could have particular appeal in China, where there are huge swathes of barren land that could be turned to growing the plant.

"China has a need (for cleaner fuels) like the rest of the world that is very real," said Marc Allen, Head of Boeing (TBC)'s China operations. "They have (economic) scale that many parts of the world cannot match. And they have fast growing technological capability that will allow them to be on the forefront on these initiatives."

(BEJ) will expand its fleet to about 700 airplanes by taking delivery of approximately 150 to 200 airplanes annually in the next five years, increasing capacity by around +10%, according to (BEJ) Chairman, Wang Changshun. (BEJ) will phase out older airplanes as it takes delivery of the newer airplanes as part of its fleet renewal program.

(BEJ) operates a fleet of about 290 airplanes; its subsidiary Shenzhen Airlines (SHZ) has a fleet of around 140 airplanes. Wang said the current operating environment is more challenging than the 2008 global financial crisis due to the “European debt crisis, fragile recovery of American economy and slowdown of Asian economy growth.”

However, Wang said that “stable growth of domestic market demand” is providing some relief as the Chinese economy is still growing and domestic consumption upgrade is accelerating.”

The European Union Emissions Trading Scheme (EU ETS) would add about CNY790 million/$124.7 million to Chinese carriers’ 2012 operating costs, which would increase to about CNY3.7 billion by 2020.

Beijing has prohibited Chinese carriers from participating in the (EU ETS) without government approval.

Chinese authorities are holding meetings regularly to discuss what retaliatory measures they would take if the (EU) makes good on its threat to take punitive action against Chinese carriers.

Air China (BEJ) has announced plans to sell and retire its remaining five 747-400M combi airplanes by June 2013. It currently uses the airplanes on domestic services from Beijing to Chengdu Shuangliu International (CTU), Guangzhou Baiyun (CAN), Shanghai Hongqiao International (SHA) and Shenzhen Bao'an International (SZX) and international flights to Frankfurt International (FRA), New York John F Kennedy International (JFK) and San Francisco International (SFO) airports.

July 2012: The Civil Aviation Administration of China (CAAC) (CAC) has cleared Air China (BEJ) to launch a subsidiary in Inner Mongolia, paving the way for (BEJ) to further expand in the North China market.

According to the (CAAC), the new airline Air China Inner Mongolia Limited has a registered capital of CNY1 billion/$159 million, in which (BEJ) holds an 80% stake, while the local government of Inner Mongolia holds a 20% stake.

The new venture, which is expected to be based at Hohhot Baita, will operate a fleet of four airplanes, comprising two 737-300s and two 737-700s, initially on domestic routes to Beijing, Shanghai, Guangzhou, Chengdu, Hangzhou and other Chinese cities. It plans to open more regional routes inside the Inner Mongolia region, which industry analysts predict will compete with Hainan Airlines (HNA) subsidiary, Tianjin Airlines (GCR), which is expanding its regional route network in the Inner Mongolia region.

(BEJ) has seven subsidiaries, comprising Shandong Airlines (SHG), Shenzhen Airlines (SHZ), Tibet Air (TBZ), Kunming Airlines (KMG), Beijing Airlines, Dalian Airlines (DLN) and Henan Airlines. China Eastern Airlines (CEA) also has a Yunnan subsidiary, while China Southern Airlines (GUN) has a Chongqing subsidiary (CGQ). Hainan Airlines (HNA) has a Yunnan subsidiary and Beijing-based Capital Airlines (DER).

Industry analysts point out that subsidiaries enable China’s domestic carriers to receive cash support and enjoy favorable policies from different local governments. However, safety concerns remain a challenge because of the severe shortage of pilots (FC) and other aviation professionals in China.

(AMECO) Beijing has appointed Liao Linghong as Executive Director of its Operation division. Liao was previously the deputy General Manager Chengdu Base of Air China (BEJ) Technics. It also named Liu Chunxi as Executive Director of its Safety & Management Division. Liu formerly served as Deputy General Manager of Dalian Airlines.

737-89L (40034, B-5679), 777-39LER (38671, B-2032), A320-214 (5014, B-6915), A330-243 (1330, B-6549), deliveries.

August 2012: Air China (BEJ) has reported a first-half net profit of +CNY945 million/+$149 million, down -76.7% over a net income of +CNY4.056 billion for the year-ago period, mainly due to weak cargo demand and high fuel prices.

(BEJ) also cited the global economic downturn, slowdown of market demand and increased market competition for the decline.

Operating revenue rose +3.82% to CNY47.33 billion against a +7.6% increase in operating expenses to CNY44.75 billion. Fuel costs were up +9.6% to CNY17.81 billion year-over-year.

Passenger boardings increased +3.26% to 34.8 million. The average load factor was 80.04% LF, down -0.71 points. (RPK)s grew +4.8% to 62.34 billion, while (ASK)s increased +5.72%.

Cargo traffic volume declined -5.63% to 664,600 tonnes. (RFTK)s dropped -5.67% to 2.26 billion against a decrease of -1.29% in (AFTK)s to 3.98 billion.

In the first half, (BEJ) took delivery of 23 airplanes and phased out 14 units. As of June 30, (BEJ)’s fleet was 441 airplanes.

“Looking into the second half of this year, fuel prices will continue to impact the financial performance of airline industry. And fluctuation of exchange rates will also bring some uncertainties to us. For these reasons, we will maintain stable operations and seize marketing opportunities as well as deepen cooperation with Cathay Pacific Airways (CAT) to achieve a better performance,” (BEJ) Chairman, Wang Changshun said.

Air China (BEJ) has signed contracts with (CAE) for three full-flight simulators (FFS) in a deal worth C$42 million/$42 million at list prices. The 7000 Series (FFS)s will be delivered to (BEJ)’s Training Center in Beijing in 2013 and will provide A320, A330 and 737 training. Each (FFS) will be equipped with a (CAE) Tropos 6000 visual system.

September 2012: Air China (BEJ) has launched a four times weekly, Shanghai Pudong - Lanzhou service using A320 airplanes. (bej) competes with carriers such as China Eastern Airlines (CEA) and Hainan Airlines (HNA) on the route. Lanzhou is located in the northwest Gansu province.

Air China (BEJ) and its competitor China Southern Airlines (GUN) are planning to cooperate on the route from Beijing to Paris Charles de Gaulle (CDG) from the end of October if they receive government approval for plans to use (GUN) A380-800s on the route currently served by (BEJ) on a daily basis with 777-300ERs. (BEJ)'s (CEO), Cai Jianjiang has confirmed such plans. (GUN) currently uses its first three A380-800s on domestic flights from Beijing to Guangzhou and Hong Kong Chep Lap Kok International (HKG). It will start deploying the A380s on its first international route from October 12 operating daily between Guangzhou and Los Angeles International (LAX). Currently, (GUN) serves Paris (CDG) daily with an A330-200 from Guangzhou, while (BEJ) also serves (CDG) from Shanghai Pudong International (PVG) four times weekly with A340-300s in addition to the daily flight from Beijing. In recent years, (GUN) has struggled to be allocated international traffic rights out of Beijing. It currently only operates international flights from there to Amsterdam Schiphol (AMS), Dubai International (DXB), Jeddah King Abdul Aziz (JED), Seoul Gimpo (GMP), Seoul Incheon International (ICN) and Tashkent Yuzhny (TAS).

Boeing (TBC) and (AMECO) Beijing have completed the first of 10 777-200 passenger interior upgrade modifications for Air China (BEJ). The 777-200s are being upgraded to three-class configuration including business (C), premium economy (PY) and economy (Y).

Air China (BEJ) has finalized an order for five 747-8Is, which was previously announced in March 2011. The value of the order is $1.7 billion, based on current list prices. (BEJ) said last year the 747-8I will deliver in 2014 - 2015 and will boost capacity by +6.6%.

October 2012: Air China (BEJ) launched a new domestic route on 28 October. From Wuhan (WUH) in central China, the Star (SAL) Alliance airline now flies daily to Lanzhou (LHW) in the northwest of the country using 8C, 12OY-seat A319 airplanes. Four other airlines compete on the route; each daily flights are operated by China Southern (GUN), Hainan Airlines (HNA) and Xiamen Airlines (XIA), while China Eastern (CEA) operates the route three times a week.

China’s Qingdao municipal government is in negotiations with Air China (BEJ) and its subsidiary, Shandong Airlines (SHG) to launch Qingdao Airlines, according to Qingdao Municipal Transport Committee Deputy Director, Zhao Haibin.

According to industry analysts, the Qingdao government is seeking to partner with an established Chinese carrier as new Civil Aviation Administration of China (CAC) standards for new entrants make it difficult to launch new carriers.

All major Chinese carriers have been forging closer cooperative relationships with local governments. Industry analysts say that subsidiaries enable China’s domestic carriers to receive cash support and enjoy favorable policies from different local governments.

China Southern Airlines (GUN) last month launched Chongqing Airlines and entered into a joint venture agreement with government-owned Henan Civil Aviation Investment to launch a subsidiary, China Southern Henan Airlines Company.

Airbus (EDS) has delivered the 100th A320 family airplane assembled at its final assembly line (FAL) in China. The A320 was delivered to Air China (BEJ) and will be deployed on domestic routes.

777-300ER delivery with "Smiling China" titles. The airplane livery features a distinctive blended paint design of 40 smiling faces of Chinese people, to represent the critical role that the Chinese aviation industry has played in bringing China to the world. The 40 people portrayed were selected from a social media campaign organized by Air China (BEJ) and Boeing (TBC) in July 2012. People were invited through the most widely used social media platform in China to submit a smiling face with an inspiring message.

SEE ATTACHED - - "BEJ-777-300ER - SMILING CHINA - 2012-10."

November 2012: Virgin America (VUS) and Air China (BEJ) have signed an interline agreement offering seamless travel on the networks of both carriers across their respective routes in North America and Asia. (BEJ) passengers can connect from a (VUS) city to Beijing and beyond via San Francisco International Airport (SFO), Los Angeles International Airport (LAX) or John F Kennedy International Airport (JFK). Both airlines will transfer baggage between connecting flights to passengers’ final destinations.

Interline electronic tickets for (VUS) and (BEJ) connecting flights can now be booked through all the major Global Distribution Systems and via (BEJ)’s distribution channels.

(BEJ) VP North America, Dr Zhihang Chi said, “Our partnership with Virgin America (VUS) creates convenient connecting opportunities at Air China (BEJ)’s strategically important gateways in San Francisco, Los Angeles and New York. This expands and strengthens both our networks and benefits travelers from the United States and China.”

(BEJ) offers daily nonstop 777-300ER service from Beijing to San Francisco, California, and New York, plus double daily flights to Los Angeles, California. It is the only carrier with nonstop service between Los Angeles and Beijing. (BEJ)’s New York and San Francisco airplanes are scheduled to be upgraded to the 777-300ER in 2013.

Air China (BEJ) expanded its domestic network on 8 November when the (BEJ) launched a new service from Tianjin (TSN) on the coast, east of Beijing via Chongqing (CKG) in the southwest of the country, to Lijiang (LJG) near the border to Burma in Yunnan Province. Flights operate three times a week with 737s. On the Tianjin to Chongqing sector, (BEJ) faces competition from West Air (CHO)’s and Tianjin Airlines (GCR)’s each daily flights as well as Sichuan Airlines (SIC)’s three flights a week, while the Chongqing to Lijiang route faces further competition: West Air (CHO) operates twice-daily and Chongqing Airlines (CGQ) 11 times weekly, while Xiamen Airlines (XIA), Lucky Air (LKY) and Sichuan Airlines (SIC) each operate daily.

(BEJ) commenced services on the 2,500 km route from Chongqing (CKG) in south-west China, to Harbin (HRB) in the north-east of the country. Daily flights, which will be operated via Xi’an (XIY), are now served using 737-700s and face competition from seven weekly services each by Chongqing Airlines (CGQ) (via Qingdao), Shandong Airlines (SHG) (via Chongqing), and Sichuan Airlines (SIC) (via Nanjing); additionally, China Southern (GUN) offers thrice-daily frequencies via Zhengzhou.

(GA) Innovation China (GAIC), an Air China (BEJ)/(GA) Telesis joint venture, signed a Memo of Understanding (MOU) with Apollo Aviation Management for the consignment of two 737-700s, to be delivered in 2013. (GAIC) will disassemble the airplanes at (AMECO) in Beijing and warehouse the parts in Beijing.

Air China (BEJ) has operated a first test flight with one of its A319-100s to the new world's highest airport of Daocheng Yading (DCY) that is expected to be fully opened for commercial operations in 2013. The airport is located at 4,410 m/14,469 ft above sea level in the Tibet autonomous region.

January 2013: Air China (BEJ) formally announced its new 777-300ER Beijing - Houston service, which will actually be its first new USA route in three decades. It also serves New York (JFK), Los Angeles and San Francisco, as it has been doing for many years. Houston, of course, is a hub for (BEJ)’s Star Alliance (SAL) partner United, not to mention a city thriving on a decade-long energy sector boom. Among the energy firms based in Houston: Conoco-Phillips, Baker-Hughes, Halliburton and Marathon Oil, as well as the USA offices of many global energy firms. Houston is to energy, you might say, what New York City is to finance. Separately, "Routes Online" reports that Air China (BEJ) will also add Beijing flights to Geneva, another
Star (SAL) Alliance hub, starting in May.

AMECO Beijing (BEJ) completed a "C" check for one ACT Airlines (MyCargo Airlines) (ACC) 747-481BD SCF, its first contract from the carrier.

February 2013: Air China (BEJ) said it will open three international routes over the next few months. The routes comprise 4X-weekly, Beijing - Geneva A330-200 service to launch May 7, 3X-weekly, Chengdu - Frankfurt A330-200 service on May 19, and 4X-weekly, Beijing - Houston 777-300ER service to open July 11.

March 2013: Air China (BEJ) will begin Beijing - Houston service with 777-300ERs in July. Beijing services increased: -New York to 11X weekly, -Los Angeles 2X daily with 777-300ERs, and -Vancouver to 11X weekly with A330-200s.

The Chinese government has increased airport charges for domestic carriers. Effective April 1, domestic airlines will pay the same fees as foreign carriers on international routes. Currently, domestic airlines pay -40% less in airport charges to operate international routes than their foreign counterparts.

Air China (BEJ) is expected to be hit the hardest. (BEJ) is expecting its annual operating costs to rise from CNY800 million/$127 million to CNY1 billion. (BEJ) operates half its flights on international routes.

(BEJ), Cathay Pacific (CAT) and Shanghai International Airport have launched a ground handling service joint venture (JV). The new venture, which has a registered capital of CNY360 million/$57.3 million, is 41% owned by Shanghai International Airport Company and 10% by the Shanghai Airport Authority. Air China (BEJ) holds a 24% stake and Cathay Pacific (CAT)’s wholly owned subsidiary, Hong Kong Airport Services holds the remaining 25% stake.

Shanghai Airport Authority and Shanghai International Airport Company have transferred their existing airport ground handling services contracts (including for Cathay Pacific (CAT) and its subsidiary Dragonair (DRG)) to the (JV). Air China (BEJ) will transfer ground handling services to the (JV) from April 1.

The new entity provides ground handling services for 30 carriers, comprising 11 domestic carriers and 19 foreign carriers, accounting for one-third of Shanghai Airports’ market share.

Shanghai Airport Authority and Shanghai International Airport Company’s ground handling staff have also been transferred to the new joint venture (JV) company to ensure the continuity of operations at both Pudong and Hongqiao airports.

Air China (BEJ) and (GA) Telesis have launched a joint venture (JV), Beijing Ji-An. The 50/50 (JV) will be the first China-based integrated airplane trader/lessor of used airplanes and will also introduce a full-scale airplane disassembly and redistribution business covering the entire Asian market.

According to (GA) Telesis, Beijing Ji-An signed a memorandum of understanding (MOU) with Apollo Aviation Management Limited for the consignment of two next-generation 737-700s, to be delivered this year. Beijing Ji-An plans to disassemble the airplanes at (AMECO) Beijing. The parts derived from the disassemblies will be warehoused in Beijing and targeted for use in the Asian market.

(AMECO) Beijing completed the first 737-800 cabin modification for Air China (BEJ), which includes first-class (F) cabin layout modification and (PC) power system installation. Beginning April 1, (AMECO) Beijing will perform another 10 737-800 airplane cabin modifications for (BEJ).

Air China (BEJ) has agreed to buy 31 Boeing airplanes, including 20 737-800s, according to a filing with the Hong Kong stock exchange made by (BEJ).

In addition to the 737-800s, (BEJ) said it has agreed to order two 747-8I Intercontinental airplanes, one 777-300ER and eight 777F freighters. The 777Fs will be used by Air China Cargo.

Under terms of the agreement with Boeing (TBC), Air China (BEJ) said it has the option to swap four 737-800s for one 777-300ER.

INCDT: An Air China (BEJ) 737-800 parked at Tianjin Binhai International Airport suffered damage after strong winds pushed it into a nearby aerobridge. The 737-89L (CFM56-7B26) (40030, /11 B-5621), was parked at the airport when the incident happened on Saturday, 9 March 2013. The airframe was built in October 2011. Strong winds measuring 25m/s /4,900 ft/min had pushed the 737-800, causing its nose to crash into the aerobridge, resulting in damage, said (BEJ).

There was no one on board the airplane when the incident occurred.

April 2013: Air China (BEJ) has reported a 2012 net profit of +CNY4.95 billion/+$788 million, down -33.8% compared to +CNY7.5 billion in 2011, according to a filing released by the Shanghai Stock Exchange.

Operating revenue rose +2.8% to CNY99.84 billion, while operating expenses grew +5.32% to CNY80.77 billion. Fuel costs climbed +5.5% to CNY35.64 billion. (BEJ) cited the global economic recession, higher fuel prices and intensifying competition as the main reasons for the profit decline.

Passenger boardings increased +3.9% to 72.4 million with an average load factor of 80.4% LF, down -1.06 points. Traffic jumped +5.09% to 129.8 billion (RPK)s on an increase of +6.5% in capacity to 161.38 billion (ASK)s. Cargo traffic volume rose +1.8% to 1.17 million tonnes. Cargo traffic improved +3.3% to 5.007 billion (RFTK)s against an increase of +3.6% in capacity to 8.47 billion (AFTK)s.

Last year, (BEJ) introduced 32 new airplanes and phased out 19 airplanes. As of December 31, 2012, its fleet comprised 301 airplanes with an average age of 6.65 years.

Looking forward, Chairman, Wang Changshun said (BEJ) “will face pressures from the slowdown of capacity growth, the accelerating adjustments in the industrial landscape and intensifying competition, among others,” but (BEJ) would also benefit from “continuous growth and economic transitions of the Chinese economy, the growth of aviation market in the People’s Republic of China will exceed its Gross Domestic Product (GDP) growth, making it the market with the highest potential of development globally.”

(BEJ) reported a first-quarter net profit of +CNY249 million/+$40 million, up +3.98% from net income of +CNY239.1 million in the year-ago quarter.

(BEJ) will begin 3X-weekly, Chengdu - Frankfurt service on May 19. (BEJ) will begin Beijing - Houston service with 777-300ERs in July. Beijing services increased: Beijing - New York to 11X weekly, Beijing - Los Angeles, 2X daily with 777-300ERs, and Beijing - Vancouver to 11X weekly with A330-200s.

Shanghai Pudong expects its fourth runway to be completed at the end of 2013 but new slots are unlikely to be available until some point in 2014. It is not clear (not even to Chinese carriers) how many new slots will be available, but an early estimate of 242 additional movements (121 round trips) between 7 to 22 each day could be possible. A more deciding factor will be how much additional airspace is opened by China's military for the runway.

The majority of the new slots at Shanghai Pudong Airport (and even upwards of 75%) will likely be allocated to China's domestic carriers. China Eastern (CEA), based at Shanghai, will have to battle Air China (BEJ), which is based at Beijing but looking to establish a hub at Shanghai. As the national flag carrier, Air China (BEJ) and its lobbying network may do well. Private carriers Juneyao (JYA) and Spring Airlines (CQH) will also look to expand their home bases.

A number of carriers, including low cost carriers (LCC)s, will seek to move midnight services to daylight hours, while any number of foreign carriers will seek to expand their presence or enter Shanghai for the first time. Strategic allocation will help Pudong, but the decision will be heavy, almost entirely, political.

Aircraft Maintenance & Engineering Company (AMECO) Beijing (BEJ) has inked a contract with Southern Air (SOF) to perform heavy checks on three 747s. The 747s will start layover at (AMECO) Beijing from early May. (AMECO) Beijing is a joint venture (JV) between Air China (BEJ) and Lufthansa German Airlines (DLH). It was established in 1989, with (BEJ) holding 60% and (DLH) 40% of registered capital.

May 2013: Air China (BEJ), the largest Chinese carrier offering flights to Europe, inaugurated (BEJ) services to the 12th destination it serves in the old continent on 7 May, and now offers a four-times weekly schedule on the 8,200 km route from Beijing (PEK) to Geneva (GVA) using A330-200s. Fan Cheng, General Secretary of Air China’s Party committee, said: “The new route will further promote economic and cultural exchanges between the two cities. It will also provide more convenience for transit passengers from Tokyo, Seoul, Hong Kong, Bangkok, and Manila.” The route is also Geneva’s first direct link to Asia.

(BEJ) has started flights from Beijing to Houston. It also has started flights from Chengdu (CTU) to Frankfurt (FRA). This comes in addition to the 13 existing weekly flights from Beijing, and daily flights from Shanghai Pudong. A330-200s are deployed to operate the 7,800 km route.

Frankfurt, Geneva, and Houston are all Star (SAL) Alliance hubs.

Air China (BEJ) and its subsidiary Shenzhen Airlines (SHZ) have signed deals to buy a total of 100 Airbus (EDS) A320-series planes for 8.85 billion USA dollars. In a statement filed to the Hong Kong stock exchange, (BEJ), listed both in Hong Kong and Shanghai, said it agreed to buy 60 A320-series airplanes for 5.37 billion USA dollars, which would be paid by cash in installments.
It expects to take delivery of the 60 planes in stages from 2014 to 2020.

Its subsidiary, Shenzhen Airlines (SHZ) agreed to buy 40 A320-series planes for 3.48 billion USA dollars, which would also be paid by cash in installments. The 40 planes are expected to be delivered in stages from 2016 to 2020. The transaction will strengthen the fleet capacity of the Air China Group with an increase of about +15.9% based on the number of available tonne kms by the end of 2012. In particular, the deal is in line with the market requirements for (BEJ) and will expand the fleet capacity of Shenzhen Airlines (SHZ) in south China. Airbus (EDS) had agreed to buy back six A340-series airplanes in advance from (BEJ) based on an earlier arrangement.

June 2013: Air China (BEJ) began 3X-weekly, Chengdu - Frankfurt A330-200 service.

(AMECO) Beijing has completed cabin upgrades on 10 Air China (BEJ) 777-200s, marking the end of a 10-month project. Modifications include changing the airplane into a three-class configuration with business (C)-, premium economy (PY)- and economy (Y)-class. In business (C) class, (AMECO)replaced seats and installed (LCD) video monitors. In the new premium economy (PY) class, (AMECO) installed a (PC) power system and reconfigured its passenger service unit (PSU). SEE ATTACHED - - "BEJ-2013-06 - 777 CABIN UPGRADE."

Over the past two years, (AMECO) also performed cabin modifications on 16 Air China (BEJ) A330-200s, 16 A321s and 11 737-800s.

July 2013: Canada and China have forged a new and expanded bilateral aviation agreement that will allow for a threefold increase in passenger and cargo flights between those countries.

Canada’s Transport Minister, Jean-C Lapierre and International Trade Minister, Jim Peterson announced the agreement this month. “Given the rapid growth in air travel between Canada and China, this new agreement is very timely,” Lapierre said. “Expanding air services to China gives Canadians and Canadian business, new doorways through which they can increase their presence in this dynamic market,” Peterson added. The agreement permits additional passenger, all-cargo and code share services by the airlines of Canada and China. Air Canada (ACN) and Cargojet (CJT) intend to introduce new air services with the expanded rights, and Air Transat (AIJ) have also expressed interest in serving China.

(ACN) Executive VP & (CCO), Ben Smith said, “This summer, (ACN) has already added a total of seven weekly return flights to Beijing from Toronto and Vancouver, raising the number of (ACN) return flights to Beijing and Shanghai to 35 per week. The enhanced bilateral further expands opportunities for (ACN) to extend its coverage of cities in China in cooperation with our Star (SAL) Alliance partners, Air China (BEJ) and Shenzhen Airlines (SHZ).

Air China (BEJ) became the second carrier to offer services between Hohhot (HET) in Inner Mongolia and Taipei (TPE), following (EVA) Air’s launch earlier in June. Beginning on June 25, (BEJ) operated a thrice-weekly schedule on the 2,000 km route using 737-800s. (EVA) Air provides competition with services of the same frequency.

(BEJ) began 4X-weekly, Beijing - Geneva service. (BEJ) which already operates flights from Beijing (PEK) to Los Angeles (14 weekly), New York (JFK) (11), and San Francisco (7) in the USA, added Houston Intercontinental, Texas (IAH) as its fourth destination in the country on 11 July. Four-weekly services are offered on the 11,600 km route and operated using 777-300s. SEE ATTACHED - - "BEJ-2013-07 - HOUSTON TO BEIJING" WHICH ALSO SHOWS (BEJ) CO-CHAIRWOMAN, MS YINXIANG WANG (HOLDING AIRPLANE MODEL).

(BEJ) has become the first Chinese carrier to initiate a trial of free in-flight Wi-Fi service on its A330-300 Beijing - Chengdu service.

Using satellite communication systems, (BEJ) passengers can access social media websites, email and stock market information on tablets or laptops. However, passengers cannot access the Wi-Fi service from smartphones. “Even though laptops and tablets are allowed, cell phones still can’t be used on flights as they may endanger safety,” an airline spokesperson said.

“The technology is only used on certain types of fights. But it will be used on more flights, although this might be a slow process due to the restriction of the technology and the flight type,” the spokesperson added.

As early as 2011, (BEJ) launched its first live trial of Gogo’s in-flight entertainment (IFE) system and intra-cabin connection service on its 737-800, Beijing - Chengdu route.

Hainan Airlines (HNA) plans to test in-flight Wi-Fi service; China Eastern (CEA) has similar plans.

777-39LER (38679, B-2039), and A320-214 (5568, B-9918), ex-(B-507L), deliveries.

August 2013: Air China (BEJ) has posted a first-half net profit of +CNY1.15 billion/+$186 million, up +9.9% over a net income of +CNY1.04 billion in the same period last year, according to a statement released by the Shanghai Stock Exchange.

September 2013: Air China (BEJ) is planning to amalgamate its maintenance arm with the group’s (MRO) joint venture (JV) with Lufthansa (DLH), (AMECO) Beijing, during the first half of 2014.

(BEJ) has been planning to merge Air China Technics and (AMECO) for a number of years, but uncertainty about the effects on the German partner’s standing in the business has been an obstacle. Now, (AMECO) says that the merger will be completed during the first half in 2014.

What will happen to Lufthansa (DLH)’s 40% shareholding in the business and whether the (AMECO) name will be retained, are still unclear, however.

If (DLH) does not increase its stake, the merger with Air China Technics would likely lead to a reduced shareholding by (DLH) in the overall business.

Air China (BEJ) and (DLH) signed a 40-year contract, when (AMECO) was established in 1989. (AMECO) is China’s largest Maintenance Repair & Overhaul (MRO) provider, with half of its business coming from Air China (BEJ).

While (AMECO) operates as a partner in Lufthansa Technik (LTK)’s (MRO) network today, (LTK) is not the shareholder in the business. (LTK) was established five years after (AMECO)’s formation, when (DLH) reorganised its Engineering division as a wholly owned standalone company.

Meanwhile, Air China (BEJ) set up its in own (MRO) unit, Air China Technics, in 2004. This mainly conducts Line Maintenance for the parent fleet, but (BEJ) wants to expand the business to a full-service (MRO) provider and attract third-party customers, thus becoming a competitor to (DLH) (LTK).

(DLH) (LTK) says that it is discussing the shareholding, but declined to provide any detail before a conclusion has been reached.

August Wilhelm Henningsen, (DLH) (LTK)’s (CEO), said in 2011 that the group’s engagement with (AMECO) was a long-term investment aimed at gaining presence in the Chinese market.

777-39LER (38680, B-2040), delivery.

October 2013: Air China (BEJ) says it tore up its normal business model with the decision to launch services to Houston, but the move has instantly reaped rewards. (BEJ) started operating four flights a week between its Beijing hub and Houston on July 11th using 777-300ER airplanes, and the route was immediately profitable, says (BEJ)’s VP & General Manager North America, Zhihang Chi.

“We operated a total of 12 flights in July, and we actually turned a small profit, which I’ve never seen [happen so quickly] before in my career for a new wide body route.” The decision to launch the service “turned our traditional business model on its head,” said Chi.
“We usually go to coastal or northern cities that are a big ethnic Chinese population base. That’s not the case in Houston.”

One aim of flying to Houston is to capture USA-originating “oil” business traffic to China. “Houston is the world’s energy capital,” said Chi. He added that the ongoing evolution of the USA - China market was another factor in the decision to launch Houston services: “As the dynamic between the USA and China has been changing, our USA operations had been mainly reliant on the USA point of sale, but the China point of sale has been rising very fast and today it is almost half and half. That is an enabler for a service like Houston as it mitigates risk.”

Chi says other potential new USA routes are being examined, “but we’re waiting for the right airplane,” referring to the delayed delivery of its 787s. (BEJ) is due to begin receiving its 787-9s in late 2015.

Air China (BEJ) has launched four new domestic routes at the start of the winter season, involving a total of seven different airports. The only airport to gain more than a single route is Hangzhou (HGH) where two new domestic service have been launched. All four routes are already served by between one and five other carriers. The four new routes launched October 27th are Hangzhou (HGH) to Haikou, 7x weekly using A320s, (HGH) to Lijuiang 7x weekly using A319s, Shanghai (PVG) to Kunming (KMG), 7x weekly using 737-800s, and Wenzhou (WNZ) to Guiyang (KWE), 4x weekly using A319s.

November 2013: Air China (BEJ) launched daily flights on November 1st from Hangzhou (HGH) to Tianjin (TSN). The 1,000 km route is already served by four other carriers: Xiamen Airlines (XIA) with 22 weekly flights; and Okay Airways (OKA), Sichuan Airlines (SIC) and Tianjin Airlines (GCR), all with daily flights. (BEJ) will operate the service with 737-800s. Last year, Hangzhou Airport, located less than <200 km from Shanghai, handled 19.1 million passengers (about the same as Dublin), making it China’s tenth busiest airport.

Air China (BEJ) grew its presence in the market from China to Thailand last week, as it commenced services on the 2,900 km route from Beijing (PEK) to Chiang Mai (CNX), the largest city in the north of the country. Beginning on November 7th, (BEJ) offers thrice-weekly schedule on the newly launched route, which it operates using 737-800s. (BEJ) is the only operator to link the Chinese capital and Chiang Mai with direct flights at present. Other Thai destinations in the airline’s offering are Bangkok (20 weekly flights) and Phuket (six).

(BEJ) introduced flights on November 20th between Chengdu (CTU) and Aksu (AKU), located in the north-west of China, close to the border with Kyrgyzstan. The 2,730 km route will be served thrice-weekly (Wednesdays, Fridays, Sundays) with (BEJ)’s A319s. Up until now Aksu’s only non-stop scheduled services were multiple daily flights to Urumqi, operated by China Southern Airlines (GUN), Hainan Airlines (HNA) and Tianjin Airlines (GCR).

(BEJ) begins 3x-weekly, Shanghai - Hawaii A330 flights on January 21, 2014.

December 2013: Air China (BEJ) has introduced flights between Beijing (PEK) and Siem Reap (REP) in Cambodia. Service on the 3,210 km sector began on December 1st and will be operated twice-weekly (Sundays and Wednesdays) using (BEJ)’s 737s. Up until November 28th the route was served twice-weekly by China Eastern Airlines (CEA) with A320s. The Cambodian airport, gateway to Angkor Wat, is currently served non-stop from five Chinese airports, the others being Guangzhou (China Southern Airlines (GUN) and Cambodia Angkor Air (AOL), Hangzhou (Cambodia Angkor Air (AOL)), Kunming (China Eastern Airlines (CEA)), and Shanghai Pudong (China Eastern Airlines (CEA) and Spring Airlines) (CQH).

Air China (BEJ) will upgrade the airplanes it flies on USA routes to 777-300ER jets as of February 11, 2014. At that time, all its routes to continental USA destinations: San Francisco, New York, Los Angeles, and Houston will be flown on the 777-300ER, Air China (BEJ) announced December 30.

Surges in tourist and business traveler numbers in recent years created the need for higher seat capacity and Air China (BEJ) will continue to increase capacity by expanding the route network. Capacity is up +33% for the period from summer 2013 through spring 2014, with flights between Beijing and New York up to 11 per week as of March 31, 2013 and flights between Beijing and Los Angeles to two per day. (BEJ) established nonstop Beijing - Houston service as of July 11 and on January 21, 2014, (BEJ) will launch a route to Hawaii, becoming the first carrier to operate between Beijing and that island.

The 777-300ER has Air China (BEJ)’s most luxurious cabin interior, with 180-degree full-flat seats in first (F) and business (C) class and power outlets and entertainment systems throughout the whole airplane.

(BEJ)’s largest airplane currently flying the (SFO) to (PEK) route is the 347-seat, 747-400.

Air China (BEJ) has officially phased out the 757-200 from its fleet. 757-2ZO (29792, B-2855), belonging to the airline's Air China Southwest (XIN) division, operated its last flight between Chengdu and Guangzhou on December 15. As its stands, Air China Southwest (XIN) now operates an exclusive Airbus fleet.

737-89L (41313, B-5851), (ALC) leased, 757-2ZO (27367, B-2841), converted to freighter and operated by Air China Cargo (CAO), A320-214 (5771, B-9926), ex-(B-509L), and A330-243 (1471, B-5933), ex-(F-WWYI) delivery.

January 2014: SEE ATTACHED - - "BEJ-2014-01-TOP 2013 WORLD AIRLINES-A/B."

Air China (BEJ) launched the first-ever non-stop service between Beijing and Honolulu after receiving approvals from Chinese and USA regulatory agencies.

Air China (BEJ) celebrated the start of its Beijing - Hawaii service with a ceremony held at T3 of Beijing Capital International Airport on January 20, 2014. At the ceremony, dancers from Hawaii treated the audience to the distinctive Hula dance, which is a showcase of Hawaii's indigenous culture, and presented garlands to the invited guests on stage, giving the occasion a rich tropical feel. SEE ATTACHED PHOTO - - "BEJ-2014-01 BEIJING TO HAWAII."

The new service, CA837/8, is the first nonstop air link between Beijing and Hawaii. It's operated three times a week on Tuesday, Friday and Sunday with wide body A330-200s. The outbound flight departs from Beijing at 1:30 am Beijing time and arrives in Hawaii at 4:30 pm local time. The return flight takes off from Hawaii at 10:00 pm local time and arrives in Beijing at 5:20 am Beijing time on the third day.

As the birthplace of modern surfing, Hawaii offers a wide range of facilities for such outdoor activities as sailing, scuba diving and golfing.

In recent years, China's market demand for travel to Hawaii has been growing rapidly. Statistics show that in 2012 Chinese traveler numbers increased by +64% year-on-year. The new route will meet the surging demand for air services of Chinese travelers to Hawaii, sparing the travelers residing in areas around Beijing the trouble of having to transfer in Shanghai, and offer an additional transfer option to travelers from Europe and the Middle East bound for Hawaii. In addition to the Beijing - Hawaii nonstop service, other new international services that Air China will soon introduce include Beijing - Vienna - Barcelona and Shanghai - Munich. These new services will further cement the carrier's global route network and make it easier for passengers in China and neighboring countries to travel to other parts of the world via Beijing.

Air China (BEJ) parent, China National Aviation Holding Company (CNAH) on January 17th named Cai Jianjiang as new General Manager. Cai, who is currently Air China (BEJ) President, will succeed Wang Changshun, who is to be appointed as Vice Minister, Ministry of Transport of China. Wang Changshun, who is a former Vice Minister of the Civil Aviation Administration of China (CAAC) (CAC), has served as Air China (BEJ) General Manager since November 2011. He has also served as Air China (BEJ)'s board Chairman and is expected to resign from this position after he takes over his new position.

Cai, 49 years old, joined Air China (BEJ) in 2001. He has been President & Executive Director of Air China (BEJ) since 2007. Before that, Cai served as VP of Air China (BEJ) from September 2004 to February 2007. He has been Chairman of Shenzhen Airlines (SHZ) since April 2010. He also used to be General Manager of the Shanghai Branch, Assistant President, and Manager Marketing Department in Air China (BEJ). He graduated from a college that later became the Civil Aviation University of China.

Cai is a low-key person but excellent in management. In his tenure as Air China (BEJ) President, (BEJ), China's flag carrier has been the most profitable airline in the country.

Later, the board of Air China Ltd named Cai Jianjiang as Chairman of (BEJ). The move comes as (BEJ) faces intensifying domestic competition, with the government moving to further liberalize China's skies and for the first time promote the growth of budget airlines.

The appointment follows the departure of previous Chairman, Wang Changshun to take up a post as Deputy Head of China's Ministry of Transport.

Analysts said Mr Cai's promotion will help ensure continuity at the flag carrier, which has been seeking to further expand its overseas reach.

Song Zhiyong, 49, succeeded Mr Cai as company President. Mr Song is also a Deputy General Manager of China National Aviation Holding Company, Air China (BEJ)'s state-owned parent company.

On January 20, Air China (BEJ)'s Chongqing Branch took delivery of its 34th airplane, with a brand new 737-800 (B-5803), landing at Chongqing Jiangbei International Airport (CKG) and officially joining the fleet of the branch company. The newly-introduced airplane will boost the capacity of the branch company in the Winter/Spring flight season and Spring Festival travel rush. Meanwhile, the company launched two new domestic services including Chongqing - Zhuhai and Chongqing - Yinchuan - Changchun routes. The 737-800 airplane and its crew were given a warm welcome at (CKG) by leaders of the Air China Chongqing Branch.

February 2014: Air China (BEJ) announced it plans to launch Tianjin - Dalian - Osaka service from March 1st. The new flight will be operated by the flag carrier's Dalian Branch, using its Boeing 737-800s. The Tianjin - Dalian - Osaka service will be offered three times per week on Mondays, Wednesdays and Saturdays. The outbound flight CA151 is scheduled to take off from Tianjin Binhai International Airport (TSN) at 9:05 am and arrive in Osaka at 1:20 pm, with a stopover at Dalian Zhoushuizi International Airport (DLC) from 10:00 am to 11:00 am; while the return flight CA152 will leave Osaka at 2:20 pm, and land at (TSN) at 7:00 pm, with a stopover at (DLC) from 5:00 pm to 6:00 pm.

March 2014: Air China (BEJ) has reported a 2013 net profit of +CNY3.26 billion/+$530 million based on international accounting standards, down -32% compared to a net income of +CNY4.82 billion in 2012.

Revenue fell -1.3% to CNY98.18 billion, while expenses rose +3.29% to CNY94.06 billion. Fuel costs decreased -5.38% to CNY33.72 billion.

(BEJ) cited declining yields, decelerating economic growth and intensifying competition for the sharp profit decline. Passenger boardings increased +7.27% to 77.68 million with an average load factor of 80.8% LF, up +0.4 point over the prior year. Passenger traffic climbed +9.4% to 141.97 billion (RPK)s against a +8.9% increase in passenger capacity to 175.68 million (ASK)s. Cargo traffic rose +0.17% to 5.015 billion (RFTK)s, while cargo capacity grew +2.34% to 8.664 billion (AFTK)s.

Last year, Air China (BEJ) introduced 31 airplanes and phased out 16 airplanes, leaving carrier with 497 airplanes as of December 31, 2013 with an average fleet age of 6.33 years.

Air China (BEJ) strengthened its network with two new services from Tianjin (TSN) on March 1st, both operated thrice-weekly by (BEJ)’s 737-800s. With the shortest sector being the 373-km service to Dalian (DLC), and the longest being inaugurated to Osaka Kansai (KIX) at 1,677 km operated via Dalian (DLC), only (BEJ) will face competition, from China Southern Airlines (GUN) (11), TianJin (GCR) Airlines (36), and Xiamen Airlines (XIA) (five).

Air China returned to London Gatwick with 4x-weekly ,Beijing Airbus A330-200 service. (BEJ) will start 4x-weekly, Beijing - Vladivostok service on June 3.

Air China (BEJ) will launch a Beijing - Vienna - Barcelona service on May 5. The new four-times weekly service will be operated with an A330-300 in a three-class configuration, including premium economy (PY).

(BEJ) said: “Air China (BEJ)'s Beijing - Vienna - Barcelona service will not only make it easier to travel between East Asia and Central and Southern Europe, sparing passengers the trouble of having to make transfers, but also offer an additional option to travelers between such cities as Tokyo, Seoul, Hong Kong, Bangkok, and Manila, plus Europe.” (BEJ) now offers offers more than >100 flights per week between China and Europe. With Vienna and Barcelona, it will serve 23 European routes.

It already flies to the likes of London, Paris, Frankfurt, Rome, Moscow, and Madrid.

Europe is growing in popularity with Chinese tourists, particularly as the Schengen visa system allows them to visit multiple cities in one trip.

(BEJ) said it will start 4x-weekly, Beijing - Washington Dulles service from June 10 using a Boeing 777-300ER. (BEJ) said the new service will “cement its presence in the North American market, offering a new bridge of exchanges between the two capitals of two nations.” Washington will be Air China (BEJ)’s seventh North American destination. It currently operates flights to New York (JFK), Los Angeles, San Francisco, Houston, Honolulu, and Vancouver.

Air China (BEJ) noted that the number of air passengers traveling between China and the USA reached 3.89 million in 2012, up +85.2% over 2009.

In recent years, Air China (BEJ) has showed its high confidence in the Wenzhou aviation market by increasing capacity, purchasing an aviation headquarter building, and setting up a new branch. After several years' preparation, the Wenzhou Branch of Air China (BEJ) is expected to be set up in the first half of this year, becoming the first branch in the region.

Since 2013, Air China (BEJ) has doubled its capacity input in Wenzhou. And (BEJ) is planning to add another airplane staying overnight at Wenzhou Airport, bring its total number to 6. Meanwhile, the number of daily flight will be increased from 16 in 2012 to 30 now.

As early as September 2007, Air China (BEJ) and the Wenzhou municipal government signed an agreement to set up a base in Wenzhou. In 2009, the local government agreed to grant the area C10 in Longwan center to (BEJ) for the purpose of building an Air China (BEJ) Wenzhou base.

April 2014: Hawaiian Airlines (HWI), which this month launched 3x-weekly Airbus A330 service between Honolulu and Beijing, has signed a code share agreement with Air China (BEJ).

(HWI) said that the code share deal “leverages the reach of [the carriers’] respective hubs in Honolulu and Beijing to offer more options and a more streamlined experience for customers traveling to further destinations.” (HWI) first announced the Honolulu - Beijing route last May. Under the terms of the code share agreement, (HWI) will place its “HA” code on Air China (BEJ)-operated flights from Beijing to Shanghai, Hangzhou, Guangzhou, and Shenyang. Air China (BEJ) will place its “CA” code on Hawaiian-operated flights from Honolulu to Kahului, Lihu'e, Kona, and Hilo.

Hawaiian (HWI) President & (CEO), Mark Dunkerley said Hawaiian passengers traveling to Beijing will have “the ability to easily explore additional domestic destinations within China on a single ticket from Honolulu.” Air China (BEJ) President, Song Zhiyong commented that “the code share partnership with Hawaiian Airlines (HWI) will further extend the networks of both companies.”

(HWI) added, “Future cooperation between both carriers is expected to include additional code share cities in both China and North America. Both Hawaiian Airlines (HWI) and Air China (BEJ) are also negotiating a reciprocal partnership that will allow their respective frequent flyer members to earn and redeem miles for travel on either carrier.”

(AMECO) (BEJ) is now providing line maintenance and releasing service for Etihad Airways (EHD) at Chengdu. In December 2013, (AMECO) (BEJ) opened another outstation, at Hangzhou International Airport.

May 2014: Air China (BEJ) has increased its presence in Europe with the addition of two additional destinations. On May 5th, (BEJ) began four times weekly flights from Beijing (PEK) to Vienna (VIE) - - SEE ATTACHED PHOTO - - "BEJ-2014-05-TO VIENNA-A/B/C" with the A330-300, then flying on to Barcelona (BCN). Feng Run’e, Vice President of Air China said: “Twenty-two years ago, Air China (BEJ) used to have flights to Vienna. Today, the long history of Europe, the growing of the European Union (EU) and the irresistible charm of Vienna bring us back. I believe that the re-union of (BEJ) and Vienna will make our partnership tighter, stronger and more fruitful.”

Lufthansa (DLH) and Air China (BEJ) are in talks that could lead the German and Chinese carriers to forming a revenue-sharing joint venture (JV) similar to those that (DLH) has with United Airlines (UAL), Air Canada (ACN) and All Nippon Airways (ANA).

The joint venture (JV), if agreed, would deepen the relationship that (DLH) already has with fellow Star (SAL) Alliance partner, Air China (BEJ). Lufthansa Group (CFO), Simone Menne confirmed the talks during the release of the Group’s 2014 first quarter financials this week. She did not give any details or timelines.

(DLH)’s transatlantic (JV) with (UAL) and (ACN) and its Japan (JV) with (ANA) provide important boosts to those markets and a similar arrangement with Air China (BEJ) could do the same for the fast-growing China market.

Beijing plans to begin construction on a new CNY86 billion/$14 billion airport in Daxing, possibly before July, according to an industry insider. It is expected to open in 2018.

The new airport (which is expected to serve Beijing, Tianjin and Hebei) will be able to handle an annual passenger volume of 45 million in 2020, 72 million in 2025 and 100 million in the longer term.

Industry analysts say the new airport will help to ease pressure on Beijing Capital Airport (PEK), which had a passenger volume of 81.8 million last year, according to a statement published by the airport in January. “The main reason that Beijing has decided to build the new airport is because the passenger traffic volume at Beijing Capital Airport has exceeded the 80 million it was originally designed to target, and the figure keeps rising,” an industry insider noted, adding that passenger numbers at (PEK) surpassed that of Atlanta International Airport, the world’s No 1 airport in January.

(PEK) is also suffering from severe slot shortages as more and more domestic carriers are eager to explore the Beijing market. China Southern Airlines (GUN) has reportedly signed a cooperation agreement with the Beijing government, paving the way for the Guangzhou-based carrier to enhance its position at the new airport. (GUN) noted that over the next 10 years, it will allocate about 200 airplanes (Airbus A330s and A380s) from (PEK) to the new airport in Daxing.

Air China (BEJ) has adopted the Abacus electronic miscellaneous document technology to create a paperless ticketing environment.

June 2014: Air China (BEJ) launched 4x-weekly, Beijing - Washington Dulles service with a Boeing 777-300ER. (BEJ) made Munich (MUC) its fourth non-stop destination in Europe (after Frankfurt, Paris (CDG), and Milan Malpensa) from Shanghai Pudong (PVG), when it began operating 4x weekly flights in June. The 8,800 km route will be operated by the airline’s A330-200s - - SEE PHOTO - - "BEK-2014-06-A330 TO MUNICH." The route is already served by fellow Star (SAL) Alliance airline Lufthansa (DLH), who operate the service on a daily basis. (BEJ) already serves Munich with daily flights from its main base at Beijing.

Air China (BEJ) has launched two new international services from the world’s second busiest airport, Beijing (PEK). On June 10th, the Chinese flag-carrier began a four times weekly service on the 11,140 km route to Washington Dulles, Virginia (IAD) using its 777-300s. The route is already served daily by Star (SAL) Alliance partner United Airlines. The following day, (BEJ) initiated four times weekly flights to Jeju (CJU) in South Korea using 737-800s. The 1,140 km route will see frequency increase to daily from July 9th. Competition on this route is provided by Korean Air (KAL) (daily flights) and China Eastern Airlines (CEA) (twice-weekly flights).

(BEJ) will initially deploy its fleet of 787-9s on flights to North America. (BEJ)'s first of fifteen 787-9s on order is scheduled to arrive in late-2015.

The 787-9 will initially be deployed on services to secondary cities in North America with Mexican flights also under consideration given existing strong demand.

Air China (BEJ)'s North American network includes Honolulu, Houston International, Los Angeles International, New York (JFK), San Francisco, Vancouver International, and Washington Dulles.

Air China (BEJ) currently has 310 airplanes, and serves 36 countries, 174 destinations, 447 routes and 1,153 daily flights.

A321-232 (6159, B-1833), (ALE) leased, ex-(D-AVXQ); A330-343 (1538, B-5947), ex-(F-WWCO), delivery.

July 2014: Air China (BEJ) and Lufthansa (DLH) have signed a memorandum of understanding (MOU) to extend their existing partnership and form a commercial joint venture (JV). The (JV) will enable the two Star (SAL) Alliance carriers to cooperate on some routes between China and Europe to take advantage of the growing demand for trade and passenger travel between the markets.

“The (MOU) should pave the way for the creation of a commercial joint venture (JV) between (DLH) and (BEJ). The new partnership agreement should come into force as early as the start of the winter flight timetable in late October 2014.”

(DLH) (CEO), Carsten Spohr said the agreement will lead to better flight connections and services between Europe and China. It is not difficult to see this (JV) enhancing the position of each airline, assuming it meets (EU) competition requirements. Competitors will seek to grow existing (JV)s, while establishing new ones. In some instances, they will be responding to the Air China (BEJ) - Lufthansa (DLH) (JV), and in other instances, they have been ready but held off due to an uncertain regulatory environment. Allowing another (JV) potentially increases the pressure for more to follow.

But more immediately, and closer to the purposes of Air China (BEJ) and (DLH), the (JV) will at least partly remove lingering tensions between (BEJ) and the Lufthansa Group, the two largest carriers between Europe and China. (BEJ) has overshadowed (DLH), with more growth to come as Air China (BEJ) sits astride what will be the world's single largest aviation market. But (BEJ) requires precious beyond traffic that (DLH) can control, as well as more extensive international experience. Between them, the two account for 35% of Europe - China flights, and 84% of Germany - China flights.

For (DLH), a China (JV) adds to those in Japan and North America, while this is the first long-haul (JV) for Air China (BEJ). Meanwhile Gulf carriers are not this (JV)'s primary target; their access in China is relatively restricted and routes to Europe via the Gulf are circuitous.

The Air China (BEJ) and Lufthansa Group (JV) will be implemented as early as the start of the northern winter 2014/2015 schedule, to commence in October 2014. The (JV) will provide "even better flight connections and services in the future" including greater flexibility to combine flights. But beyond these generic and non-specific details, there is no other public information. Presumably details are being worked through with European Commission (EC) competition authorities, but there are also a variety of commercial deals to be concluded between the parties. Each airline has pretensions for market dominance and achieving a suitable commercial balance will not be simple.

In October 2013, then-Lufthansa Group (CEO), Christoph Franz remarked: “In the future, we will not only link our mutual hubs, but it will be important to also have direct links between major European markets and Air China (BEJ)’s hubs, and the other way round. It’s imaginable we could create a joint venture (jv), but that takes time to develop and create a commercial balance.” Since Mr Franz's October 2013 comments, the situation has publicly progressed from a possibility to reality, albeit with details to be worked out, of an (MoU) to establish a (JV), with details to be worked out. No doubt behind the scenes, there have been significant negotiations and these are ongoing. The announcement was timed to coincide with German Chancellor Dr Angela Merkel's visit to China. Ms Merkel was present at the (MoU) signing.

(JV)s by now have forged a well-trodden path of joint pricing (allowing different carriers' flights to be combined more flexibly), schedule coordination (enabling more connections and reducing connection times while also opening new routes), joint marketing and customer experience (such as through loyalty program). These are guidelines and not definitive; the Japanese - North American (JV)s feature higher pricing from Japanese carriers than their North American counterparts, a response to market demand. (JV)s can also differ in how (and if) they embrace financial performance (revenue or profit).

Achieving a full (JV) would bring (BEJ) and (DLH) closer together. Air China (BEJ) has already grown in Europe, surpassing (DLH) in the China - Europe market, with clear ambitions for more. But what must be apparent to (DLH) is (BEJ)'s need for beyond traffic and overall international help. Chinese airlines are still on a steep learning curve in customer service and foreign distribution matters. These factors, while perhaps seemingly minor, can have a disproportionate impact on overall performance. Indeed, they can make or break an operation.

Air China (BEJ) recognizes that it may have scale but (DLH) has quality with superior premium revenues, as well as experience in running multiple hubs and airlines (something that Air China (BEJ) would like to know more about as it attempts the same in China).

In these terms, the benefits perhaps appear to be on (BEJ)'s side, but (DLH) cannot simply ignore its partner. To take, there needs to be give. A strategy that excludes Air China (BEJ) could impact (DLH) in anything from bilateral access to slot times, to more subtle nuances that would make its operation in China difficult. And (DLH) has literally invested decades in relationship building with Air China (BEJ). The benefits it derives, are arguably more opaque, but not necessarily less important. Provided there is a financial component to the (JV), (DLH) should in theory benefit from what (BEJ) gains from (DLH).

Like any marriage, there will be disagreements, and even the pre-nuptial agreement will be hard fought. Undoubtedly (DLH)'s (JV) with (BEJ) will take more time to bed down than its previous (JV)s in North America or Japan. With financially sustainable growth still to emerge from China, this initiative is one for the long run.

Lufthansa (DLH) has demonstrated this with its Maintenance Repair & Overhaul (MRO) (JV) with Air China (BEJ), AMECO Beijing (40% owned by Lufthansa (DLH), 60% by Air China (BEJ)). This (JV( has experienced up and downs and an airline (JV) is unlikely to be different. Part of the (BEJ) - (DLH) announcement states that (MRO) cooperation will be expanded, but without any elaboration.

In theory, at least a (JV) will build on a long history of Air China (BEJ) - (DLH) cooperation, dating back to an extensive code share relationship, as well as (BEJ)'s entry into the Star (SAL) Alliance. As (CAPA) previously wrote:
"The two carriers have a code share agreement, dating back to 2000, on routes between Germany and China. The code share agreement initially covered nine weekly Air China (BEJ) flights and 13 weekly (DLH) flights on routes between Frankfurt and Beijing, and Shanghai. (DLH) is now (BEJ)’s biggest long-haul code share partner, measured by the number of (BEJ)-coded flights that it operates.

The code share agreement now covers 36 weekly (DLH) flights and 27 weekly (BEJ) flights from Germany to China. In addition, Austrian Airlines (AUL) operates five weekly flights from Vienna to Beijing with the Air China (BEJ) code. The code shares also cover short-haul flights operated by (DLH) in Europe and by (BEJ) in China.

Of the Lufthansa Group's approximately 1,500 Europe - China flights in the second half (2H) 2014, 87% (accounting for 89% of (ASK)s) fly to Beijing or Shanghai. These are large population centers (and catchment areas) where incomes are high, with plenty of international business activity, allowing Beijing and Shanghai flights to largely sustain themselves with limited onward traffic to elsewhere in China (or other points in Asia, an attractive target, should the (JV) include that).

Air China (BEJ) has a broader spread in Europe, flying from 13 European cities to China, mostly Beijing. ((BEJ) also operates a Chengdu - Frankfurt service). 38% of Air China (BEJ)'s European flights are from Germany (23% from Frankfurt alone), while 54% are from Lufthansa Group hubs. Premium traffic on secondary European cities is limited, while even economy (Y) passengers on prime routes consist largely of low-yielding tour groups. Air China (BEJ) has more to gain in the medium term from improved connections in Europe. There is even scope for improvement in European cities, that are not Lufthansa Group hubs.

The Lufthansa Group meanwhile, has limited exposure to secondary cities in China; but, with greater Air China (BEJ) cooperation, this could expand in the long term. In the short and medium term, connecting traffic will not be sufficient to support what are low-yielding flights.

The (BEJ) (JV) will immediately overtake in capacity size (DLH)'s (JV) with All Nippon Airways (ANA), which exclusively covers Japan. The Lufthansa Group in second half (2H) 2014 will operate 1,478 flights to China compared to 1,232 to Japan, according to (OAG) data. Seat deployment to China is disproportionately higher (approximately 320 seats per Chinese flight compared to 293 per Japanese flight) as Chinese flights use larger airplanes. Revenue levels, however, may be similar, as the Japan market can sustain rich yields.

In the medium term, there will likely be no flow on impact on (ANA). The (ANA) - (DLH) (JV) covers the Europe - Japan market, while (BEJ) - (DLH) can be expected to cover only China and, at best, limited beyond markets. There is potential for the (BEJ) - (DLH) (JV) to allow Air China (BEJ) to better market sixth freedom itineraries between Europe and Japan, via China, but this is relatively minor. Should this change, there would then be a more obvious impact on (ANA).

The bigger impact is arguably on Cathay Pacific (CAT), whose backyard of mainland China provides a large amount of feed for its European network, even with backtracking through Hong Kong. (CAT)'s position is unusual, as a Oneworld (ONW) Alliance member, but also a close partner of Air China (BEJ)'s, with mutual cross shareholdings. But (BEJ) tends to pursue its own agenda, independently of (CAT), even where the Hong Kong based airline might be disadvantaged. (BEJ) already offers more destinations from Asia, and from Lufthansa Group bases in continental Europe, it also has a wide range of onward destinations.

A substantial Air China (BEJ) - (DLH) (JV), Air China (BEJ) is likely to work to Cathay (CAT)'s detriment, although (CAT) will not walk away empty handed, thanks to its stake in Air China (BEJ). In its favor, Cathay (CAT) has a very high quality brand and premium product, with a faithful following. Wresting the eastern seaboard premium market away from it will not be a pushover.

Asiana (AAR) and Korean Air (KAL) will also be impacted, as they transport Chinese passengers to Europe, but in lower volumes than to North America. Taiwanese airlines are prevented by bilateral restrictions from carrying outbound China passengers beyond Taiwan.

Chinese routes account for 6.0% of the Lufthansa Group's second half (2H) 2014 (ASK)s, more than Japan's 5.2%, but well below the 29% in North America, covered under Lufthansa (DLH)'s trans-Atlantic (JV).

An Air China (BEJ) - Lufthansa Group (JV) will account for 35% of flights in the Europe - China market, based on (2H) 2014 schedules filed with (OAG). This also represents 36% of available seats.

Air China (BEJ) is the largest carrier between China and Europe, while (DLH) passenger airlines is the third largest (China Southern (GUN) is second). SWISS (CSR) and Austrian (AUL) are smaller players, but together help the Lufthansa Group be larger than China Southern (GUN).

When viewed as a group, AirFrance (AFA) - (KLM) is the second largest entity between China and Europe and is larger (14%) than the Lufthansa Group. However, the Air China (BEJ)- Lufthansa Group combination has a slight edge over a (theoretically) combined (AFA) - (KLM), China Eastern (CEA)/China Southern (GUN) grouping (33%).

Germany is the largest European country to receive Chinese airline flights. 25% of Chinese carriers' European flights, and 27% of (ASK)s, are bound for Germany. This is largely supported by Air China (BEJ)'s overwhelming presence in Germany. A combined (BEJ) and (DLH) will thus gain a significant presence in the Germany - China market.

Germany is China's largest European trading partner, while China is Germany's third largest. (BEJ) and (DLH) will account for 84% of flights and 88% of seats. Although this is a significant majority, it is lower than what All Nippon Airways (ANA) and (DLH) have in the Japan - Germany market.

The (BEJ) - (DLH) (JV) is likely to be misconstrued as having Gulf carriers as its primary target. Gulf carriers have heavily restricted bilateral access to China, much to their frustration. Gulf carriers have fewer weekly flights to all of China (87) than they have to just Bangkok (91). Further, Europe - China routings via the Gulf to northern Europe, are more circuitous and thus less desirable than Europe - Southeast Asia routings via the Gulf, for example. While an advantage over Gulf carriers may be a nice benefit from the (JV), that can hardly be a major motivation for it. (DLH) was investing in the (BEJ) relationship long before the Gulf carriers became a force.

The passenger profile on Gulf carriers' China routes is clearly different. On Emirates (EAD)'s China routes, six of its 20 largest beyond markets (representing 16% of transfer traffic) are European. On (EAD)'s Bangkok and Singapore routes (which are less circuitous via the Gulf), European markets comprise 53% of transfer traffic and 17 of the top 20 transfer markets.

Interestingly, the two largest European markets for (EAD)'s China routes are Madrid and Rome, two hubs whose local airlines have failed to capitalize on Asian growth; Iberia (IBE) serves no Asian points at all, while Alitalia (ALI) serves only Japan. (Alitalia (ALI) can be expected to grow in Asia (and China specifically) following Etihad (EHD)'s recent investment). This is traffic, local airlines have not capitalized on. It can most certainly not be called traffic Gulf carriers have "stolen," to use the word of detractors. If Alitalia (ALI) and Iberia (IBE) have not exploited this demand, there is no justification for (DLH) (for example) being more "entitled" to it than a Gulf carrier.

Nonetheless, a (JV) with Air China (BEJ) would put (DLH) (for once) at the vanguard of change. Gulf carriers would need to obtain an amount of Chinese traffic rights they are unlikely to achieve in the medium term, if they are to change the market the way they have in Southeast Asia or India. Leading the change in China could help (DLH) begin to make up for what it has lost elsewhere.

The (BEJ) - (DLH) deal is not the first Euro - Chinese (JV), but is likely to be the largest. Air China (BEJ) has a revenue and cost sharing agreement with Cathay Pacific (CAT) on Hong Kong - mainland China routes, while China Eastern (CEA) and AirFrance (AFA) have a (JV) between Shanghai and Paris.

China Southern (GUN) and (AFA) have a (JV) between Guangzhou and Paris, while (GUN) and (KLM) have a (JV) between Beijing and Amsterdam.

So although there are already (JV)s with Chinese carriers, the Air China (BEJ) - (DLH) (JV) is significant, since (BEJ) is the country's largest international carrier. This not only gives the (JV) considerable size, but by having a (JV) with China's largest international carrier, and one intrinsically linked to Beijing, China is signalling it will welcome further (JV) developments.

Air China (BEJ) is the largest carrier in China's two key long-haul markets of Europe and North America. China Southern (GUN) is the largest in the smaller Australian market.

Competitive pressure will urge China Eastern (CEA) and China Southern (GUN) to expand their respective (JV)s with (AFA) - (KLM), although in these scenarios (AFA) - (KLM) will share (DLH)'s concerns about unduly empowering a competitor, who will one day (quite soon) be much bigger than they are. Yet with (AFA) - (KLM) already having a larger Chinese presence than (DLH), and not being optimistic in the near future about secondary city growth, they may find it acceptable (with little to lose) to maintain the status quo.

Beyond supporting the big three, Beijing's regulatory expansiveness will be tested if (JV)s are proposed amongst other airlines. British Airways (BAB) and Finnair (FIN) for example, might find a favorable combination to China, just as they have done jointly to North America and more recently Japan. The internationally ambitious and privately-owned Hainan Airlines (HNA) may look for its own partners.

(JV)s with China will emerge from other regions. North America is the obvious pick, but since the USA requires an "open skies" agreement as a precondition for a (JV), these developments will take longer. In the interim, closer partnerships are likely, although once again, prospective suitors like Delta (DAL) are wary over empowering large competitors. (DAL), via its Northwest (NWA) heritage, arguably comes from a stronger position when negotiating a (JV).

There are details about a (JV) still to emerge from Air China (BEJ) and Lufthansa (DLH), and this will shape the timeframe of (JV)s in China; but no doubt the path is now being established for more partnerships involving Chinese airlines. While these bring opportunities, they also bring challenges (both perhaps on an unprecedented scale). (DLH)'s patient steadiness, as opposed to speedy competitive reactions, may prove to be the more successful course.

Over the summer, Air China (BEJ) and Lufthansa (DLH) will have a joint capacity input of 81 flights per week on the Sino-German routes. The two carriers currently code share on all flights between China and Germany, enabling them to expand network access to nine points in China and Germany, as well as destinations in Zurich, Spain, and Brazil.

(BEJ) currently operates 23 routes between China and Europe with 194 daily flights to 19 destinations in Europe—including London, Paris, Frankfurt, Vienna, Rome, Moscow, and Madrid. In 2013, (BEJ) transported 1.95 million passengers between China and Europe with an average load factor of over >80% LF.

Both sides will expand their collaboration in (MRO) services. (BEJ) and (DLH) established a 60:40 airplane maintenance (JV) (AMECO) Beijing in 1989. (BEJ) President & Executive Director, Song Zhiyong said the new (JV) “will facilitate (BEJ)’s efforts in expanding international route network while enabling us to achieve win-win results and provide more travel choices and convenience to our passengers.”

(DLH) already has transatlantic joint ventures (JV)s with United Airlines (UAL) and Air Canada (ACN), as well as a (JV) with (ANA) on services between Europe and Japan.

August 2014: Air China (BEJ) reported a first-half net profit of +CNY510 million/+$82.7 million, down -55% compared with a net income of +CNY1.14 billion in the year-ago period. (BEJ) had predicted in July its first-half net profits would plummet -55% to -65% year-over-year.

First-half operating revenue increased +8.5% to CNY50 billion, while operating expenses increased +6.7% to CNY48 billion.

Air China (BEJ), which said exchange rates were the main culprit for the results, reported exchange losses of -CNY721 million.

Passenger boardings climbed +7.2% to 40.14 million, with an average load factor of 81% LF, down -0.52 point year-over-year. Passenger capacity grew +11.24% to 93.13 billion (ASK)s, while passenger revenue rose +10.5% to 75.05 billion (RPK)s. Cargo capacity jumped +15% to 4.75 billion (AFTK)s against an increase of +8.3% in cargo revenue to 2.56 billion (RFTK)s.

In July, (BEJ)'s capacity input on domestic flights, international flights and regional flights increased by +3.8%, +14.2% and +12% respectively, over the last year. Passenger turnover climbed +6.2% year on year, among which domestic, regional and international (RPK)s saw growth of +3.6%, +13.8%, and 10.4%, respectively. Specifically, (BEJ) registered a +5.5% yearly growth in passenger volume to 7.3 million, among which, those taking domestic flights increased +3.9% from a year earlier to 6.1 million, and regional passenger traffic climbed +12.2% to 393,000, while international passenger traffic climbed +15.4% to 853,400, according to (BEJ)'s statistics.

(ASK) was up +7.3% year on year in July, higher than the growth in demand, which resulted in an average passenger load factor of 80.9% LF, down -0.9% points, compared with the same month last year, including a fall of -2.7% points for its international flights and an increase of +1.2% points for its regional flights.

In terms of freight, Air China Cargo (CAO)'s overall cargo and mail turnover increased by +4.4% year on year, with +6.9% yearly growth in available freight ton kilometers (AFTK)s. Cargo volume saw a +2.4% year-on-year growth, against a slight fall on a monthly basis. In addition, freight load factor was down -1.4% points to 58.1% LF.

Air China (BEJ) increased the number of international routes last year, and its capacity (ASK)s in the first half of 2014 saw a +19.6% year-on-year increase. Its first half (H1) revenue on international routes climbed +10.6% over a year earlier, which is higher than that on domestic and regional routes, Xiao Feng, Chief Accountant of Air China (BEJ) stated. He pointed out that (BEJ) will continuously boost capacity on international routes in the next two years.

Air China (BEJ) posted a -55.4% decline in profit in the first half of this year as a weaker yuan inflated overseas debt payments. Seen from the operating data of July and August, the stress of low yield has alleviated. Mr Xiao believes that (BEJ)'s second-half performance will be better than the first half. The USA routes have made a great contribution to the profit of the first half, and it will contribute more in the second half.

As to the progress of the anti-corruption campaign, Zhou Enyong, General Manager Network Sales Department stated that the relative measures have caused the declining of business (C) passenger flow; however, the business (C) market still grows rapidly, and the passenger load factor of first (F) and business (C) recorded slight increase in the first half of this year. Recently, China Southern Airlines (GUN) announced that it is set to rename its first (F) class on its domestic narrow body airplanes to business (C) class. Zhou stated that Air China (BEJ) has no immediate plans to follow (GUN).

Air China (ABZ) has launched daily flights from Chongqing (CKG) to Seoul Incheon (ICN). On August 1st, (BEJ) began service on the 2,091 km route using 737-700s. The route is already served four times weekly by Asiana Airlines (AAR). Air China (BEJ) now serves the South Korean capital from seven destinations in China, the others being Beijing, Hangzhou, Hefei, Qingdao, Tianjin, and Yanji. From Chongqing, (BEJ) only operates one other international service, to Taipei Taoyuan in Taiwan.

In July 2014, Air China (BEJ) purchased 344,000 tons of jet fuel, with an average cost of 7.114 yuan per ton. (BEJ), is set to save around -US$8 million a year in fuel costs, thanks to payload and live weather update technology from air transport Information Technology (IT) specialist company, (SITA). Following extensive trials on its international routes, (BEJ) has deployed (SITA)'s Flight Management System (FMS) "Wind Uplink" service on all international and domestic routes, to constantly update key weather information for (FMS) calculations, while en route. This enables the flight crew (FC) to adjust its flight path in-flight according to changing wind and weather conditions, so the airplane uses fuel, as cost effectively as possible.

Lu Yun-Guo, Senior Manager Operation Technology, (BEJ), said: "We started testing (SITA)'s Wind Uplink service in early 2013 and have already significantly lowered our fuel bills. In just six months, we saved close to -US$2 million, and that was with implementation across only part of our fleet. We anticipate that our annual savings across our entire fleet will be in the region of -US$8 million. Flight Crew (FC) feedback has been excellent as well. I'm proud to say that Air China (BEJ) is the first airline to use this technology in China, as part of our continuous innovation efforts."

With (SITA)'s Wind Uplink service, the airplane's (FMS) can constantly analyze weather conditions on the route ahead, to determine optimum altitude, fuel burn and arrival-time predictions. This helps reduce fuel consumption.

May Zhou, VP & General Manager, (SITA) China, said: "Our work with Air China (BEJ) provides a perfect example of how (SITA) is constantly innovating to help the air transport industry operate more efficiently and effectively. (SITA)'s Wind Uplink service will not only reduce (BEJ)'s fuel costs, it will also enhance the safety of the flights, by giving early visibility of the potential need to use contingency fuel, or, in the event of a worsening forecast, the need to divert."

(SITA)'s AIRCOM (ACARS) Services provide the backbone for the automatic Wind Uplink service. (SITA) has also installed hardware in (BEJ)'s offices to ensure the data provided to the flight crew (FC) is totally under (BEJ)'s supervision.

Effective on August 1, 2014, Karl Ulrich Garnadt, a member of the Executive Board of Deutsche Lufthansa Aktiengesellschaft and (CEO) of Lufthansa German Airlines (DLH), succeeded Stefan Lauer to become the Vice-Chairman of (AMECO) Beijing.

Air China (BEJ) has around 300 airplanes flying on more than >185 routes around China, Asia, and the world. In 2013, it carried 48.7 million passengers, putting it in the top ten global airlines. For the past eight years, (BEJ) has been named the number one Chinese airline in a variety of awards programs, including first in domestic aviation service in the 2013 China's Most Valuable Brands awards. Air China was also honored at the 2013 China International Forum on Green Development for its outstanding performance in energy saving and emission reduction, and its advocacy of green operations.

Air China (BEJ) plans to spend CNY360 million/$58.4 million to raise pilot (FC) salaries, despite its continuous profit decline. (BEJ) has 4,560 pilots (FC) who work for the Beijing-based carrier and its subsidiaries Air China Cargo (CAO), Dalian Airlines (DLN) and Inner Mongolian Airlines (IML).

Shanghai's two airports handled more passenger traffic than Beijing in the first six months of the year. According to the latest data from the operators of Beijing Capital International Airport, the airport recorded 41.57 million passengers in the first half of 2014.

But the East China Regional Administration of the (CAAC) has confirmed that Shanghai's Pudong and Hongqiao airports handled 24.47 million and 18.74 million passengers, respectively, in the same period, for a total of 43.17 million (+4% more than Beijing).

Shanghai's two airports also handled 315,187 flights in the first half of the year, compared to Beijing Capital's 283,960. Beijing Capital is currently the busiest airport in Asia and the second busiest in the world, in terms of passenger traffic. But expansion projects at both Pudong and Honqiao are expected to boost Shanghai's airport capacity to 120 million passengers per year by 2020. By this time, Beijing is also expected to have launched a new second airport.

In the first half, Air China (BEJ) took delivery of 28 airplanes and phased out 13. It currently operates 512 airplanes with an average fleet age of 6.22 years.

Looking ahead, (BEJ) said it expects China’s economy to stabilize. “China’s economy is likely to continue a trend of overall stable development. We expect that the passenger aviation business will maintain the growth observed in the first half of the year and the cargo business is likely to continue to improve,” Air China (BEJ) Chairman, Cai Jianjiang said. But he also warned challenges still remain as “the industry should continue to face intensified internal and external competition, while exchange rates and oil prices remain uncertain.”

737-89L (40042, B-1958) delivery.

September 2014: Air China (BEJ) and Kunming Airlines (KMG) began code sharing on domestic services.

Air China (BEJ) has become the first airline to operate scheduled services to the new airport at Hongyuan (AHJ). The new airport is located over >3,500 m above sea level in China’s western plateau area. On August 28th, the first A319 flight arrived from Chengdu (CTU) with 99 passengers on board. Construction of the new airport began in May 2011, and the terminal building is currently designed to handle around 350,000 passengers per annum - - SEE PHOTOS - - "BEJ-2014-09 - CHENGDU TO HONGYUAN-A/B."

A strong energy-driven economy has helped to quickly build traffic on Air China (BEJ)'s Houston - Beijing route above typical industry profitability levels. Dr Chi Zhihang, Air China VP & General Manager for North America, noted that the Houston - Beijing service was developed into a daily route only seven months after it opened, faster than any other (BEJ) international flight. "Houston should be proud," said Chi.

According to Chi, the ratio of tickets sold electronically in Houston is the highest, and corporate traffic is a strong component. After seasonal adjustments, the average occupancy rate for this leg is 80%. "This is very good from the perspective of the airline business," said Chi. For the industry, profit starts at a 60% occupancy rate.

Chi said he's confident in the future of this service "as long as China and the USA continue the good relationship we have right now and I am optimistic about the future of the bilateral relations."

INCDT: Air China (BEJ) A330-243 (TRENT 7772C-60) (873, /07 B-6092) An performing flight CA-852 from London Gatwick(UK) to Beijing (China), suffered a hydraulic failure during initial climb out of Gatwick's runway 08R preventing a full gear retraction. The A330-243 stopped the climb at FL070, dumped fuel at FL080 and returned to London Gatwick for a safe landing with open gear doors on runway 26L about 2 hours after departure. The airplane stopped on the runway and was towed to the apron.

(BEJ) reported a hydraulic failure immediately after takeoff forced the crew to return the airplane to London.

Passengers reported the captain (FC) announced the gear could not be retracted requiring them to return to London.

An observer on the ground reported the nose gear had retracted but the main gear struts were still down when the airplane climbed out of Gatwick.

(AMECO) (BEJ)’s Guangzhou outstation has started line maintenance for an Airbus A330-300 from Russia’s Aeroflot (ARO). This is its eighth international third-party customer after Qatar Airways (QTA), Egyptair (EGP), AirFrance (AFA), Turkish Airlines (THY), Air Madagascar (MAD), Garuda Indonesia (GIA), and Iraq Airways (IRQ).

A brand new Boeing 777-300ER aircraft for Air China (CA) was unveiled in a special "Love China" livery, which is the last of 20 Boeing 777-300ERs the flag carrier has on order.

The latest 777-300ER airplane, registration (B-2006), conducted its first flight from Paine Field, Everett, Washington, USA (SEE PHOTO - - "BEJ-2014-09 - 777-300ER") before delivery to (BEJ) by the end of the month. The 777-300ER has become the backbone of Air China (BEJ)'s long-haul international fleet. (BEJ) has used the airplanes for route expansion in Europe and North America since the delivery of its first 777-300ER in July 2011. Currently, all (BEJ)'s USA services are operated using the 777-300ER, an airplane type favored by business travelers worldwide.

The Boeing 777-300ER is -19% lighter than its closest competitor, greatly reducing its fuel requirement. It produces -22% less carbon dioxide per seat and costs -20% less to operate per seat.

Another state-owned carrier, China Eastern Airlines (CEA) is scheduled to take delivery of its first of 20 777-300ERs this month, when it will become the third 777-300ER operator in mainland China following Air China (BEJ) and China Southern Airlines (GUN).

On September 26, a brand new A320-214 airplane, registration number (B-1873), landed smoothly at Wuhan Tianhe International Airport (WUH) after a 13-hour flight from Toulouse, and joined the fleet of the Hubei Branch of Air China (BEJ).

The newly introduced A320 features a two-cabin configuration with 8F first class seats and 150Y economy class seats. Different from previous airplanes, the A320-214 aircraft could deliver unbeatable fuel efficiency and comfort with two latest-generation engine choices, aerodynamic refinements such as fuel-saving Sharklet wingtip devices and innovative new cabin equipment, fixtures and seat designs.

The new A320 will be deployed on Wuhan - Beijing air express and other business trunk lines including Wuhan - Shenzhen and Wuhan Guangzhou routes. Air China Hubei is planning to operate the latest A320 with Sharklets on Wuhan - Qingdao - Seoul international route, to improve its operation quality of long-haul services.

Currently, Air China Hubei operates an all-Airbus fleet of 7 A320s, flying from Wuhan to Beijing, Changchun, Chengdu, Guangzhou, Shenzhen, Xiamen, Yantai, Macau, and Chiang Mai, etc. The branch company has maintained a double-digit growth in passenger movement for five years. In 2013, it handled nearly 1.5 million passengers, up +13.2% year on year.

Air China (BEJ) took delivery of its first 747-8 Intercontinental on September 30th. (BEJ) is the first airline in Asia to operate the 747-8I, Boeing's longest passenger jet, which is 18 foot longer than the 747-400 and can seat 467 passengers. This 747-8 is the first of a (BEJ) order of 7 747-8Is .

October 2014: Air China (BEJ) reported net profit of +CNY3.16 billion/+$515 million for the first nine months of the year, down -22% compared with net income of +CNY4.06 billion in the year-ago period.

(BEJ) cited exchange losses resulting from yuan depreciation as the main reason for the profit decline. (BEJ) reported CNY2.267 billion in exchange losses from January to October.

Air China (BEJ)’s first-half net profit decreased -57.6% to +CNY474 million also due to exchange losses of -CNY721 million.

Operating revenue from January to October increased +6.7% to CNY29.79 billion from January to October, while operating expenses climbed +8.3% to CNY23 billion. Industry analysts pointed out that airfare decreases led by the decline in premium market demand (due to Beijing’s new policies restricting government officials and state-owned enterprises senior management personnel from flying premium class on business trips) also contributed to Air China (BEJ)’s profit decline.

(BEJ) did not reveal figures for passenger traffic and cargo traffic volume.

Looking ahead, Air China (BEJ) plans to accelerate its international expansion pace with the delivery of its first of seven Boeing 747-8 Intercontinental airplanes, which is operated on the Beijing - Shanghai route. The airplane is expected to be operated on routes to Europe and the USA by the end of this year.

November 2014: News Item A-1: Air Canada (ACN) and Air China (BEJ) have concluded a memorandum of understanding (MOU) setting out the main principles for a comprehensive revenue sharing joint venture (JV) providing for an enhanced partnership on routes between Canada and China which will stimulate traffic growth between the two countries.

The (JV) will generate additional service and pricing benefits for consumers traveling between the two countries, as well as provide for enhanced cooperation between the two carriers in the areas of sales, marketing and airport operations. The announcement was made in Beijing during an official visit to China by Canadian Prime Minister Stephen Harper, prior to a meeting of Asia-Pacific Economic Co-operation (APEC) member nations.

Subject to (ACN) and (BEJ) making the necessary filings, obtaining competition and other regulatory approvals and finalizing documentation, the (JV) is expected to come into effect by the end of 2015. "Working cooperatively with our partner (ACN), we will be able to provide more travel options and benefits for customers traveling between China and Canada while reducing travel times through a more streamlined travel experience," said Song Zhiyong , President & Executive Director of (BEJ). "This (JV) between (BEJ) and (ACN) will provide many benefits and commercial synergies on the important and growing market for travel and trade between Canada and China. Over the past five years, the Canada - China air travel market has grown on average by almost +11% annually and this trend is expected to remain strong according to airline industry trade group (IATA)."

"As members of the Star Alliance (SAL), (ACN) and (BEJ) will benefit from a revenue sharing (JV), as have our customers through a simplified travel experience and loyalty rewards," said Calin Rovinescu, President & (CEO) of (ACN), in Beijing to sign the (MOU). "By deepening our cooperation in the areas of scheduling and sales management, the carriers will be better able to serve customers by offering more travel options. The (JV) will provide customers of both carriers additional travel options through the expansion of code share flights to additional airports in both carriers' domestic networks as network growth is a core principle of the (JV)."

Currently, (BEJ) offers its customers code share flights operated by (ACN) between Vancouver and six Canadian cities (Edmonton, Calgary, Winnipeg, Toronto, Ottawa, and Montreal) and (ACN) offers its customers code share flights operated by (BEJ) between Beijing and six cities in China (Guangzhou, Chongqing, Chengdu, Shenyang, Wuhan, and Xi'an).

(ACN) operates up to a total of 28 flights per week between Canada and China, from Toronto and Vancouver to and from Beijing and Shanghai. Air China (BEJ) operates up to 11 flights per week between Beijing and Vancouver.

News Item A-2: Air New Zealand (ANZ) and Air China (BEJ) have signed a Statement of Intent as part of Chinese President Xi Jinping's state visit to New Zealand, that will pave the way for a strategic alliance on services between China and New Zealand.

The proposed alliance between the two national flag carriers and Star (SAL) Alliance partners would see Air China (BEJ) operate a new direct Beijing - Auckland service in addition to (ANZ)'s existing Shanghai - Auckland service. The alliance remains subject to regulatory approval.

In addition to a new route, an alliance between the carriers would bring significant benefits to customers traveling in both directions including better network connections in both China and New Zealand and increased frequency of flights.

(ANZ) (CEO), Christopher Luxon says a deeper bilateral agreement between the two airlines would help to facilitate both business and tourism links between the two countries. "China is New Zealand's second largest inbound visitor market and we expect interest in visiting New Zealand to continue to grow amongst Chinese travelers."
"However, China remains a challenging market for us to operate to. Working with a strong, well respected home market carrier like Air China (BEJ) would give us a huge opportunity to convert this potential growth, while jointly offering the additional capacity to support it."

"New Zealand businesses and travelers would also benefit from a direct link to China's capital and tourist attractions of Beijing."

Air China (BEJ) President, Song Zhiyong said (BEJ) is committed to being a global hub carrier and alliances and partnerships are an important way to expand its international network. "In the past three years we have witnessed double digit annual growth in the number of Chinese outbound tourists. New Zealand is one of the most important markets for outbound travel from China and (BEJ) is confident about the promising future of this market, particularly considering the airline's close ties with (ANZ), an innovative airline full of vitality and dynamism."

Following the signing, the airlines will progress to discussions with a view to reaching an agreement early next year, which can then be filed for regulatory approval.

News Item A-3: Air China (BEJ) will fly the Boeing 747-8 on the Beijing - New York and Beijing - San Francisco routes beginning in January, the Chinese flagship carrier said.

(BEJ) becomes the first Asian airline company to use this model of airplane. Since joining (BEJ)'s fleet in early October, the Boeing 747-8 has been in operation on the Beijing - Shanghai and Beijing - Guangzhou routes. It is to be used for the Beijing - Chengdu route starting November 9th.

(BEJ) will operate a daily 747-8I service on the Beijing - Chengdu (CTU) route, replacing the aging 747-400 airplane. Flight CA1405 is scheduled to depart Beijing Capital International Airport (PEK) at 8:00 am and arrive at (CTU) at 10:55 am, with the return flight CA1406 scheduled to take off from (CTU) at 12:00 pm and land at (PEK) at 2:45 pm.

Currently, Air China offers 15 round-trip flights daily on the Beijing - Chengdu route, accounting for 50% of the total flights and taking the largest market share among all the airlines operating the service.

(BEJ) has ordered 7 Boeing 747-8 airplanes, and the delivery will be finished by the end of 2015, the company said. With a total length of 76.4 meters, the Boeing 747-8 has 365 seats. Its maximum flight range is 14,815 km.

(BEJ) took delivery of its second 747-800I (B-2486), from Boeing in Seattle. The new 747-8I airplane had 9 crew and 15 passengers on board on its delivery flight. With the arrival of (B-2486), Air China (BEJ) will increase its 747-8I flights on Beijing - Shanghai route to double daily, starting November 9, before operating the airplane on long-haul routes from Beijing to New York and San Francisco in January 2015. (BEJ) is expected to take delivery of all 7 747-8 passenger airplanes by the end of 2015.

The 747-8I Intercontinental, the world's longest airplane, will bring double-digit improvements in fuel consumption and emissions over its predecessor, the 747-400, while generating -30% less noise. (BEJ)'s 747-8I features a four-class configuration with 365 seats, including 12F in first class, 54C in business class, 66PY in premium economy class and 233Y in economy class.

December 2014: News Item A-1: Air China (BEJ) and South African Airways (SAA) will strengthen their bilateral cooperation within the Star (SAL) Alliance. Some network reconfiguration for both airlines will occur for better passenger and cargo services between South Africa and China, and countries adjacent to both.

News Item A-2: (AMECO) Beijing’s board of directors appointed Ni Jiliang as General Manager.

News Item A-3: Civil aviation authorities in Beijing, Tianjin and Hebei province have signed a cooperative agreement to integrate air transport systems in these areas, "The Beijing News" reported.

According to the agreement, some short-haul flights from Beijing Capital International Airport will be reassigned to airports in Tianjin and Hebei province, in order to improve the transit capacity for international flights at Beijing's main airport. "We have some advantages to attract domestic passengers from Beijing. Firstly, it only takes about 40 minutes from the capital to Tianjin by taking a high-speed train," said Yan Xin, General Manager of the Tianjin Binhai International Airport. "Second, we commit that 95% of passengers who take domestic flights, will check in in less than <10 minutes; Finally, the flight ticket price is up to +30% cheaper at present," Yan added.

Besides, airports in Beijing, Tianjin and Hebei province will strengthen cooperation in managing the flight route network, safety services, training personnel and marketing.

A regular communication mechanism will also be established to share information and speed up integration. "Beijing's new airport is expected to be put into construction at the end of this year. The passenger throughput of the new airport, which is located between Beijing and Hebei, is forecast to reach 45 million by 2020 after it goes into service in 2019," said Zhou Laizhen, Deputy Director of the Civil Aviation Administration (CAAC).

News Item A-4: Air China (BEJ) has committed to purchase 60 Boeing 737NGs and MAXs, valued at more than >$6 billion at current list prices.

Boeing confirmed the tentative deal, but did not indicate how it will be split between the two generations. “Our long-standing and productive partnership with Air China (BEJ) dates back to (BEJ)’s beginning and we are proud the 737 has been part of their success. We are excited to see that the 737 family will play a significant role in (BEJ)’s continued success,” Boeing Commercial Airplanes (BCA) VP Sales & Marketing Northeast Asia, Ihssane Mounir said.

(BEJ) took delivery of the first of seven 747-8I Intercontinentals in October. The airplane is expected to be operated on routes to Europe and the USA by the end of this year, as it pushes ahead with its international expansion.

January 2015: News Item A-1: "Air Serbia (JAT) will be mainly focusing on our intra-Europe and regional growth for the time being, due to the fact that we don't have any wide-body airplanes at this stage, but we are very keen in attracting more Chinese travelers and providing as much convenience as possible. Consequently, we have worked very closely with our equity partner Etihad Airways (EHD) in terms of streamlining flight connections between Belgrade and Chinese destinations via Abu Dhabi. Additionally, we are actively following up on expanding our collaboration with Air China (BEJ)," Dane Kondic, (CEO) of Air Serbia (JAT) said in December 2014.

According to Kondic, (JAT) has signed a new Special Prorate Agreement (SPA) with Air China (BEJ), which went into effect since September 2014. Meanwhile, (JAT) the Serbian flag carrier is in the middle of serious discussions around establishing a serious code share relationship with (BEJ), and "it should only be a matter of time before all details can be finalized".

Kondic did also confirm that he will visit China in the first quarter of 2015 to meet representatives of the civil aviation and banking sectors. "Our collaboration with Chinese air transport entities has just been proceeding recently and we are always open to look for areas of further cooperation with our Chinese brothers," Kondic said.

News Item A-2: As Xiamen Gaoqi International Airport officially opened its brand-new Terminal 4 (T4) on December 28, 2014, Air China (BEJ) has since moved its entire inbound and outbound domestic flights there. In accordance with Xiamen Airport's overall transitional arrangements, domestic flights operated by (BEJ) are now using T4, while all of (BEJ)'s international flights will continue to operate from Terminal 3 (T3).

Air China (BEJ) kindly recommends passengers who have purchased tickets for Xiamen-outbound domestic flights to arrive at T4 at least two hours prior to scheduled flight departure time in order to guarantee smooth check-in and on-time boarding.

News Item A-3: Boeing (TBC) delivered two new 737-89Ls (41101, B-1760; 41109, B-1767).

February 2015: News Item A-1: Air China (CHI) has added Sri Lanka to its global route network. On February 10th, the Star (SAL) Alliance carrier commenced four times weekly flights (Tuesdays, Thursdays, Saturdays and Sundays) between Chengdu (CTU) and Colombo (CMB) using its A330s. The outbound flight departs from Chengdu at 18:30 Beijing time and arrives in Colombo at 21:50 local time. The inbound flight departs from Colombo at 23:10 local time and arrives back in Chengdu at 06:40 the following day. The 3,607 km route is not flown by any other carrier. The only other direct links between China and Colombo are with SriLankan Airlines (LNK) to Beijing, Kunming and Shanghai, and with China Eastern Airlines (CEA) from Kunming. From Chengdu, Air China (BEJ) now operates to eight international destinations; the others being Frankfurt, Hong Kong, Karachi, Kathmandu, Mumbai, Singapore, and Taipei.

News Item A-2: Air China (BEJ) is seeing a slight slot drop in premium cabin corporate traffic to North America, but has made up for it with a “surge” in paid travel from individuals, including for first (F) class.

News Item A-3: China Eastern Airlines (CEA) has selected (AMECO) Beijing (BEJ) for cabin modification of its Boeing 767 fleet. This 767 fleet belongs to Shanghai Airlines (SHA), a wholly owned subsidiary of China Eastern (CEA).

(SHA) transferred a 767 to (AMECO) (BEJ) for cabin modification in January, and the further cabin modifications on other 767s will be scheduled from April to June.

The deal covers cabin refurbishment and business (C) class modification, and the latter one is designed by (AMECO) including engineering design, airworthiness certificate and interior material package manufacture.

It has been many years of relationship with China Eastern (CEA). The Maintenance Repair & Overhaul (MRO) specialist is well experienced in providing modifications on Boeing 737, 747, 767, 777 and Airbus A330, A340 and A380, with a portfolio of the cabin, system, winglet and wing rib.

In addition, the (MRO) provider has been dedicated into (VIP) and business jet completion services since the 1990s in capabilities of 737, 747 and A330, outfitted with a cabin interior manufacture workshop as well as a hangar which can accommodate a wide-body airplane or three narrow-body airplanes at the same time.

March 2015: News Item A-1: Chinese flag carrier, Air China (BEJ) kicked off earnings reports for Chinese airlines with a +14% rise in 2014 profit, as strong growth in outbound travel demand and lower fuel prices more than offset foreign exchange losses during the year.

The Beijing-based carrier said net profit for the 12 months ended December 31 was +3.78 billion yuan/+US$608 million), according to Chinese accounting standards, up from a net profit of +3.32 billion yuan. The result was higher than the average 3.22 billion yuan forecast by nine analysts in a poll by "Thomson Reuters."

(BEJ)'s revenue rose +7.4% to 104.83 billion yuan from 97.63 billion yuan on higher air-traffic volume during the year, it said.

Air China (BEJ)'s stronger-than-expected results come on the back of the nation's resilient demand for air travel despite a weaker Chinese currency. (BEJ) said it booked a net foreign-exchange loss of -360 million yuan for 2014, as the Chinese currency depreciated against the greenback during the period. It reported a 1.94 billion yuan net foreign-exchange gain in 2013, as the yuan appreciated +3% against the dollar during the year.

A weak Chinese currency hit (BEJ)'s bottom line because much of the debt they take on to finance airplane purchases is denominated in dollars, so their debts become costlier as the yuan declines in value against the dollar. (BEJ) also has dollar-denominated airplane lease and jet-fuel purchase obligations.

Air China (BEJ), which operates the biggest international network among the three state-owned carriers, said it expects to carry at least 88.5 million passengers in 2015, up +6.6% from 83 million passengers it carried the previous year.

News Item A-2: Vancouver, British Columbia, Canada is a very important market in Air China (BEJ)'s North American services and is becoming increasingly important.

As China's national flag carrier, Air China (BEJ) began scheduled flights to Canada in 1988 and operates daily flights between Beijing and Vancouver, (BEJ)'s Canadian headquarters. (BEJ) operates 332 routes around the world, including seven in North America. In addition to commercial flights, (BEJ) provides flight service to Chinese state leaders on official international visits.

In November 2014, Air China (BEJ) and Air Canada (ACN) signed a memorandum of understanding (MOU) defining a revenue-sharing joint venture (JV). Passengers traveling on the China - Canada routes are expected to benefit from more route options, upgraded services and lower prices. The two carriers will also enhance partnerships in sales, marketing and airport operations.

Air China (BEJ) currently offers code share flights with (ACN) between Vancouver and six other Canadian cities: Edmonton, Calgary, Winnipeg, Toronto, Ottawa, and Montreal. Air Canada (ACN) also offers code share flights operated by (BEJ) between Beijing and six Chinese cities: Guangzhou, Chongqing, Chengdu, Shenyang, Wuhan, and Xi'an.

Air China (BEJ) is looking at possible expanded service to eastern Canada for later in 2015.

News Item A-3: As travel between China and the USA gains in popularity fast, increasing capacity continuously on China - USA routes has been one of the Air China (BEJ)'s important moves to enhance its long-haul schedules and build its world-spanning route network. A good reflection of that is (BEJ) will add flights to its Beijing - Los Angeles route from May 2015, further strengthening its presence on the North American market.

The new flight numbers are CA887/8. From May 2 to June 30, 2015, four flights will be offered per week on Tuesday, Thursday, Saturday, and Sunday. From July 1 to October 24, the flights will be increased to daily. The outbound flight departs from Beijing at 12:00 pm and arrives in Los Angeles at 9:00 am local time. The return flight departs from Los Angeles at 11:30 am and arrives in Beijing at 3:10 pm local time. Boeing 777-300ER, an airplane type very popular with the world's business (C) travelers, features full-flat seats in First (F) Class/Business (C) Class, as well as Central Bar, personal (AVOD)s and power outlets in all classes of service, accessible toilet and mood lighting system, which can mimic wonderful moments from sunrise to sunset.

When it comes to travelers, China is both the source market and the destination for the USA, and it's also true the other way round. Traveler numbers have been rising fast in recent years. As the largest carrier between China and the USA, Air China (BEJ) has been investing a lot in the market in terms of capacity and continuous airplane type upgrade. From 2013 to 2014, (BEJ) started three non-stop routes: Beijing - Houston, Beijing - Hawaii, and Beijing - Washington. Currently, (BEJ) serves 7 destinations in North America, including New York, Los Angeles, Houston, San Francisco, Washington, Vancouver, and Hawaii, spanning the southern, western and eastern parts of the USA. It offers 104 flights per week operated with the Boeing 777-300ER. On January 7, 2015, (BEJ)'s first Boeing 747-8I, a new member of the Boeing 747 family, made its maiden flight on its long-range route: Beijing - New York.

Air China (BEJ) also offers seasonal healthy meals on board, and chauffeured transfers for (VIP) passengers on the ground. Excellent amenities and attentive services guarantee passengers a truly pleasant journey.

News Item A-4: Air New Zealand (ANZ) and Air China (BEJ) have released details of a proposed alliance on services between China and New Zealand. The alliance, subject to regulatory approvals, would see Air China (BEJ) introduce a daily direct service between Beijing and Auckland. (BEJ), the Chinese flag carrier would also continue to code share on (ANZ)'s daily, Shanghai - Auckland service, which will be operated exclusively by Boeing 787-9 Dreamliner airplanes from August 24.

The proposed alliance would further open up Beijing as a new market to and from New Zealand and the airlines aim to almost double sustainable capacity between China and New Zealand, while delivering a range of other benefits to travelers including greater frequency and network connections.

Air New Zealand (ANZ) Chief Executive Officer (CEO), Christopher Luxon said the alliance with Air China (BEJ) would see two home carriers with complementary strengths at each end of the route working together to drive traffic in both directions. "This proposed alliance brings New Zealand and China closer, as our two countries enter the next phase of what is a very strong relationship, focused on mutual growth and respect. By connecting the Chinese capital with New Zealand for the first time in three years, we would provide tourists and business travelers with unparalleled air connectivity between and within each home market," said Mr Luxon.

"Airlines play a vital role in facilitating growth through crucial people to people connections and the movement of high value cargo. I am proud to be able to work with our long term Star Alliance (SAL) partner, Air China (BEJ), to ensure these important links make commercial sense, are sustainable and are in the interests of consumers and the wider economies."

(BEJ) Chief Executive Officer (CEO) Song Zhiyong said the relationship between China and New Zealand is entering into a new phase with significant achievements having already been made in economic development and political, as well as cultural exchanges in recent years. "We are committed to working with our Star (SAL) Alliance partner, Air New Zealand to provide better air connectivity between China and New Zealand, in order to meet the growing demand from travellers in both markets," said Mr Zhiyong.

"The proposed alliance with (ANZ) allows both flag carriers to build a sustainable air service between Beijing and Auckland, and supplement the existing connectivity between China and New Zealand. This service, along with (ANZ)'s Shanghai - Auckland service, will provide greater benefits to travelers in both countries in the coming years, - - an outcome which we will feel very proud of."

Subject to regulatory approvals, alliance services could commence as early as December 2015.

News Item A-5: Auckland International Airport, New Zealand said international passenger numbers through New Zealand's busiest gateway rose +5.4% last month, as the later timing of Chinese New Year led to a surge in travelers from China.

There were 726,529 international arrivals and departures in February, including transits, up from 689,063 a year earlier, the airport company said in its monthly traffic update. Domestic passenger numbers rose +3.3% to 590,524.

Arrivals from China soared 85% to 48,901, overtaking the UK as the third-largest source after Kiwis traveling across the border, and Australians. The number of New Zealanders slipped -1.5% to 112,928 and Australians fell -3.6% to 65,017. Visitors from the USA rose +5.3% to 26,121, while those from the UK fell -2.2% to 24,642. Passengers from India also surged (up about +50% to 5,429, to be the ninth largest source of visitors.

Chinese New Year fell in February this year, and January in 2014.

The airport company said international airplane movements rose +1.5% to 3,635 last month, while domestic movements rose +2.2% to 8,501.

The airport's 24.9%-owned Queenstown Airport Corporation had a +38% increase in international passengers to 30,382 and a +5.1% gain in domestic passengers to 92,357.

Its quarter-owned North Queensland Airports Group reported a -9.7% drop in domestic passengers to 66,396 at Mackay airport, while at Cairns airport, international passengers rose +8.3% to 56,468 and domestic rose +8.6% to 293,285.

Shares of Auckland Airport fell -0.2% to AU$4.47 and have gained +16% in the past 12 months. The stock is rated a "sell" based on the consensus of eight analysts surveyed by "Reuters" with a median price target of AU$4.09.

News Item A-6: Air China (BEJ) on Thursday March 5th resumed flights (after a gap of more than >10 years), on the route between Beijing (PEK) and Macau (MFM). The 2,012 km route will be served daily by (BEJ)’s 737-800s and will face competition from an existing thrice-daily service operated by Air Macau (MCU), in which Air China (BEJ) is a majority shareholder. This is now (BEJ)’s second route to Macau, as it also operates daily flights from Wuhan.

To meet market demand, Air China (BEJ) has increased its Beijing - Milan service to daily flight, offering 14 flights weekly to Milan, together with another daily service from Shanghai.

The newly increased Milan flights are CA49/50. The outbound flight is scheduled to take off from Beijing Capital International Airport (PEK) at 1:45 pm and land in Milan at 6:00 pm, with the return flight departing from Milan at 8:00 pm and arriving in Beijing at 1:30 pm the next day. The daily, Shanghai - Milan flights CA967/8 are operated as normal (the outbound flight departs from Shanghai Pudong International Airport (PVG) at 1:30 am and arrives in Milan at 7:15 pm, with the return flight leaving Milan at 11:30 am and reaching Shanghai at 5:50 am the next day (all local time).

After the schedule expansion, the Beijing/Shanghai - Milan service as a whole is operated with Airbus A330-200s. Its Business (C) Class is configured with 180-degree full-flat seats, whose ergonomic design can fully meet the needs of premium business (C) travelers looking to have a fortifying rest during the flight. All classes of service are outfitted with personal entertainment system (AVOD) and power sockets, keeping passengers entertained for the whole flight.

In order to meet the growing travelling needs, Air China (BEJ) will increase its Beijing - Paris service to two daily flights, starting June 1.

The newly added daily service will be operated by A330 airplanes, with flight number CA875/6. The outbound flight is scheduled to take off from Beijing Capital International Airport (PEK) at 2:05 am and arrive in Paris at 7:25 am, with the return flight leaving Paris Charles De Gaulle Airport (CDG) at 2:20 pm and reaching (PEK) at 6:30 am the next day. The current daily flight CA933/4 is operated by Boeing 777-300 airplanes. The outbound flight is planned to depart from (PEK) at 1:35 pm and land in Paris at 6:40 pm, with the inbound flight departing from (CDG) at 8:20 pm and arriving in Beijing at 12:25 pm the next day (all local time).

The newly added flights will further promote the exchanges between China and France and offer more flight options to travelers to other European cities.

News Item A-7: Air China (BEJ) will start Beijing - Melbourne four-times weekly nonstop service from June 1, 2015, becoming the only carrier that offers Beijing - Melbourne nonstop service. At the same time, (BEJ) will continue its Shanghai - Melbourne nonstop service.

The four-times weekly flights CA165/6 will be offered on Monday/Wednesday/Friday/Sunday. The service is slated to increase to daily from October 25, 2015. The outbound flight departs from Beijing at 2:00 am and arrives in Melbourne at 3:30 pm local time; the return flight departs from Melbourne at 8:40 pm local time and arrives in Beijing at 6:30 am. The flights will be operated with Airbus A330-200s. Onboard, the Business (C) Class is outfitted with full-flat seats; all classes of service offer personal (AVOD)s and power outlets, keeping passengers entertained for the duration of the flight.

Melbourne is Australia's second largest city and the capital of the state of Victoria, which has earned its reputation as "Garden State." It is located in peaceful Yarra Valley. Melbourne used to be the capital of Australia. Now, time-honored classic buildings of Victorian style are everywhere. With its lush vegetation, which covers 40% of the urban area, the city has been repeatedly voted the "Most Livable City." With a lot to see and do, Melbourne is an ideal destination for leisure travelers.

For Melbourne and Australia as a whole, for years China has remained the largest trading partner, export market and import source market and also the largest source market of students and international visitors. The China - Australia Free Trade Agreement signed at the end of 2014 has further made the cooperation in the fields of economy, trade, culture and education between the two countries closer. The start of nonstop flights between Beijing and Melbourne will further promote the trade ties between, and the healthy development of, the two countries.

With the start of the Beijing - Melbourne flights, the number of flights per week that Air China (BEJ) operates from Beijing/Shanghai to Australia (Sydney/Melbourne) will increase to 23, and Air China (BEJ)'s capacity on the China - Australia route will go up by +60%. Utilizing the extensive network of the Star (SAL) Alliance, passengers can easily get to 1,328 airports in 195 countries around the world.

News Item A-8: Global Eagle Entertainment (GEE) provided its ku-band connectivity system to an Air China (BEJ) Boeing 777, testing with "Xinhau News Agency"’s in-flight live newscast. Passengers were able to watch live National People Congress/Chinese People’s Political Consultative Conferences and also use (GEE)’s in-flight connectivity to surf the internet, stream movies and watch television programs.

2 737-89L (41103, B-1762; 41108, B-1766), and A319-115 (6514, B-6468), ex-(D-AVYC), deliveries.

April 2015: News Item A-1: China's flag carrier Air China (BEJ) posted a 1,707% year-on-year increase in first-quarter net profit, thanks to robust demand for air travel and lower oil prices.

During the January-to-March period, (BEJ) reported operating revenue of 25.26 million yuan, with a year-on-year increase of +3.45%. Its first-quarter net profit was +1.68 billion yuan, sharply higher than >92.71 million it recorded a year earlier.

Air China (BEJ) said improved operational efficiency, an increase in capacity to cope with robust air traffic demand as well as a sharp fall in jet fuel prices contributed to the strong profitability in the first quarter.

In the first quarter, passenger capacity, measured by Available Seat Kilometers ("ASK") was 50.631 billion, an increase of +10.20% year-on-year. Overall passenger traffic measured by Revenue Passenger Kilometers (RPK) was 40.621 billion, up +8.14% year-on-year. (RPK)s on international and domestic routes increased by +11.95% and +7.30% year-on-year to 11.925 billion and 27.009 billion, respectively, and (RPK)s on regional routes dropped -3.01% to 1.687 billion.

During the period, cargo capacity as measured by Available Freight Tonne Kilometers (AFTK) increased by +21.48% to 2.850 billion. Cargo traffic as measured by Revenue Freight Tonne Kilometers (RFTK) rose by +25.40% to 1.492 billion.

The passenger load factor was 80.23% LF, a year-on-year decrease of -1.53% points, while cargo and mail load factor increased +1.64% points to 52.37% LF.

Separately, state-run rival, China Eastern Airlines (CEA) said it swung to a first-quarter net profit of +1.56 billion yuan from a first-quarter net loss of -205 million yuan a year earlier.

News Item A-2: China’s big three carriers have all reported a turnaround in the first quarter due to market demand growth and lower fuel prices.

According to financial pre-announcements, Air China (BEJ)’s first-quarter net income increased +CNY1.6 billion/+$262 million to +CNY1.8 billion, up from a net profit of +CNY93 million in the year-ago quarter. China Southern Airlines (GUN) reported a first-quarter net income of +CNY1.8 billion to +CNY2 billion, reversed from a net loss of -CNY306 million year-over-year. China Eastern Airlines (CEA) posted a net income of +CNY1.5 billion to 1.6 billion, reversed from a net deficit of -CNY205 million in the same quarter of 2014.

Air China (BEJ)’s passenger boardings grew +7.6% to 21.71 million with an average load factor of 80.2% LF, down -1.5 points over the year-ago period. Passenger revenue rose +8.1% to 40.6 billion (RPK)s against a +10% increase in passenger capacity to 50.6 billion (ASK)s.

China Southern (GUN)’s passenger traffic climbed +12% to 26.8 million with an average load factor of 81.37% LF, up +1.16 points over the same quarter last year. Passenger revenue grew +15.5% to 46.4 billion (RPK)s, while capacity rose +13.8% to 57 billion (ASK)s.

China Eastern (CEA)’s passenger boardings grew +9.43% to 22 million with an average load factor of 80% LF, down -3 points year-over-year. Revenue jumped +10.6% to 34.43 billion (RPK)s against a +11% capacity increase to 42.95 billion (ASK)s.

Looking ahead, industry analysts predict China’s big three will see a better 2015 owing to robust growth of market demand, capacity slowdown, lower fuel prices and stable exchange rates.

News Item A-3: To facilitate the increasing business (C) travel during the 2015 China Import and Export Fair, also known as the Canton Fair, Air China (BEJ) is set to deploy its Boeing 747-8I and 777-300ER wide-body airplanes on several Beijing - Guangzhou services.

Meanwhile, (BEJ) will provide first-class (F), premium economy (PY) class, (VIP) airport shuttle and free parking for passengers who take (BEJ) flights to/from Guangzhou.

Besides, Air China (BEJ) set up service counters at exhibition hall of Canton Fair, helping business travelers for booking tickets, rescheduling, online check-in and so on.

With its international network expansion, (BEJ) expects to operate 362 passenger routes by the end of summer season, including 91 international and 16 regional ones, becoming China's only carrier with services to all five continents.

News Item A-4: See attached "BEJ-2015-04 - TOP 25 WORLD TRAFFIC.jpg" and "BEJ-2015-04 - TOP REGIONAL TRAFFIC.jpg."

May 2015: News Item A-1: Air China (BEJ) will fly 4x-weekly, Budapest - Beijing Airbus A330-200 flights. (BEJ) expanded its presence in the Japanese market with the addition of a new route on May 15th, when it commenced four weekly flights from Tianjin (TSN) to Tokyo Narita (NRT). The 2,062 km sector will be operated via its existing Dalian service, utilizing (BEJ)’s 737-800s. No other carrier serves this airport pair.

News Item A-2: Air China (BEJ)’s Maintenance Repair & Overhaul (MRO) facility will be absorbed into (AMECO) to form a single new entity, which is expected to form a new joint venture (JV) with Rolls Royce (RRC) for engine maintenance.

News Item A-3: (AMECO) Beijing is providing overhaul on a (PW4000) engine from (A.C.C.L) Airmotive Services, (AMECO)’s first engine service for a Middle East customer.

737-89L (41105, B-1764), 747-89L (44933, B-2482), A320-214 (6466, B-1686), ex-(B-506L) deliveries.

June 2015: News Item A-1: Beijing may merge the cargo subsidiaries of China’s big three carriers (Air China (BEJ), China Southern Airlines (GUN) and China Eastern Airlines (CEA) in an effort to improve the competitiveness of domestic cargo companies.

News Item A-2: Shenzhen Airlines (SHZ), a subsidiary of Air China (BEJ) and a Star (SAL) Alliance member, has agreed to buy 46 Boeing 737s, according to an Air China (BEJ) filing with the Shanghai Stock Exchange.

The stock exchange filing has been widely reported, but Boeing (TBC) has not officially confirmed the order and Shenzhen Airlines (SHZ) has not commented.

Air China (BEJ) said the 737s will be delivered between 2016 and 2020, but it did not say which 737 model or models (SHZ) ordered.

Based on list prices, the value of the order is at least $3.6 billion, which would be the value if all of the 737s are 737-700s. A number of news reports cite Air China (BEJ) valuing the order at $4.3 billion, which would indicate at least some of the 46 airplanes are models other than the 737-700.

July 2015: News Item A-1: Starting July 1, Air China (BEJ) has increased the Beijing - Los Angeles (LAX) services to 3x-day, which is the first ever thrice-daily trans-Pacific service departing from Beijing in China's aviation history.

(BEJ),the flag carrier firstly launched the Beijing - (LAX) service as early as 1982, then doubled its frequency from 2013.

The number of passengers traveling between China and the USA has registered a sharp increase in recent years. Air China (BEJ) has been all through devoted to diversifying Sino - USA flights in capacity input, airplane type upgrading and route network expansion. From 2013 to 2014, (BEJ) has continuously launched Beijing - Houston, Beijing - Hawaii, and Beijing - Washington services. Up to date, (BEJ) has reached 7 destinations in North America (New York, LAX, Houston, San Francisco, Washington, Vancouver, and Hawaii, providing 138 flights weekly and using wide body 777-300ER jetliners on all seven routes. Besides, a latest 747-8 joined (BEJ)'s fleet in this January and debuted its inaugural flights from Beijing to New York and San Francisco, offering more qualified flying experiences for customers.

News Item A-2: Air China on July 3rd launched non-stop flights between Beijing and Hakodate, Japan, to meet a surge in demand by Chinese tourists.

A Boeing 737-800 departs twice a week on Monday and Friday. The outbound flights depart at 12:10 pm (Beijing time) and arrive in Hakodate at 4:35 pm local time. The return flights depart Hakodate at 5:45 pm local time and arrive in Beijing at 8:45 pm Beijing time.

"Air China (BEJ) understands the high value of the Japanese market. (BEJ) hopes to fully utilize its quality services and extensive route network to further economic and cultural exchanges, and cooperation between China and Japan" an Air China (BEJ) Marketing department official said.

Tourism is a positive area in the often bumpy relationship between China and Japan. Last year, more than >2.4 million Chinese tourists visited Japan. To further boost tourism, China has proposed that both countries name and promote 10 tourist destinations.

News Item A-3: Air China (BEJ) launched services between Beijing (PEK) and Linzhi (LZY) on July 16. The seasonal 2,348 km sector will be flown daily using the Star (SAL) Alliance member’s A319s, and runs until October 24. (BEJ) also operates a daily year-round service from the Tibetan city to Chengdu. On July 18, (BEJ) commenced international services from Tianjin (TSN) to Okinawa (OKA) in Japan. The 1,727 km service will operate 2x-weekly on Tuesdays and Saturdays, and will be flown by (BEJ)’s 737-800s. On July 20, Air China (BEJ) launched its second new destination from Tianjin, this time to Bangkok Suvarnabhumi (BKK) in Thailand. The 3,261 km city pair will be flown daily, also using (BEJ)’s 737-800s. None of (BEJ)’s new routes will face direct competition

News Item A-4: Surinam Airways ((IATA) Code: PY, based at Paramaribo International) (SUR) will replace its outgoing A340-300 (49, PZ-TCP), with an ex-Air China (BEJ) machine of the same type.

News Item A-5: (AMECO) (BEJ) Expands Facility for VIP and Business Jet Completion" by WCARN.com, July 17, 2015.

On July 15, a workshop for (VIP) and business jet completion is put into use in (AMECO). The workshop is not a newly-built one but retrofitted from a current facility in its main base. It covers 1,600 square meters, and will be used as an interior manufacturing workshop. This is the second workshop for interior manufacture following the first one opened in September 2012.

"The new workshop will expand our interior manufacture capabilities," said Fengbin, the Head of VIP & Business Jet Services Subdivision. "Besides, we are transforming a hangar dedicated for VIP and Business Jet completion and make it accommodate new airplane types," Feng added. He also disclosed that (Ameco) has signed contracts with several customers for their business jets letter checks in 2015.

In addition, (AMECO)'s VIP & Business Jet Services Subdivision provides design schemes on cabin modification. In the first half year of 2015, (AMECO) has completed cabin modifications on six Boeing airplanes from a Chinese carrier, and the cabin layout is designed by (AMECO) and acquired (CAAC) Modification Design Approval. (AMECO) also designed and produced modification kits for this customer.

(AMECO) has been promoting its VIP and Business Jet completion capabilities since 2012. Currently, (AMECO)'s capabilities on VIP and business jets cover all processes from design, Engineering, certification to installation, while the products involve the entire gamut of modifications and maintenance.

News Item A-6: Air China (BEJ) has received board approval for selling one Airbus A320 aircraft to Air Macau (MCU).

The A320 (B-6960) will be sold at a price of 267.8 million yuan.

News Item A-7: Air China plans to raise no more than CNY12 billion/$2 billion by circulating non-public 994 million shares to purchase 15 Boeing 787 airplanes.

According an Air China (BEJ) statement released by the Shanghai Stock Exchange, the 15 airplanes will be delivered over the next three years (seven of the will be introduced in 2016, six in 2017 and two in 2018).

(BEJ) plans to operate the 787s on international long-haul routes to the USA and Europe, which earns about CNY7.2 billion in operating revenue every year.

As of December 31, 2014, Air China (BEJ) operated 540 aircraft, comprising 519 passenger aircraft, 12 freighters and nine business jets with an average fleet age of 6.08 years. It plans to introduce 66 aircraft this year, 38 aircraft in 2016, and 38 aircraft in 2017.

(BEJ) predicted its first-half profit would soar +701% to +CNY3.8 billion to +CNY4 billion, compared to a net income of +CNY474 million year-over-year. (BEJ) credited lower fuel prices and robust market demand growth as main reasons for the improved performance.

737-89L (41107, B-1526) and A319-115 (6603, B-6478), ex-(B-502L), deliveries.

August 2015: News Item A-1: "Air China (BEJ)’s (1H) Profit Increases More Than >700%" by (ATW) Katie Cantle, August 28, 2015.

Air China (BEJ) has reported a net income of +CNY4.2 billion/+$660 million for the first half of 2015, up +721% over the net profit of +CNY510 million for the same period of last year.

Operating revenue rose +3.87% to CNY51.9 billion, while operating costs increased by +5% to CNY45.2 billion.

(BEJ) cited “robust growth in market demand” and “much lower fuel prices” as the main reasons for its much improved performance.

Passenger boardings jumped +8.8% to CNY44 million with an average load factor of almost 80% LF, down -0.72% points compared to the year-ago period.

Passenger revenue climbed +9.5% to 82 billion (RPK)s versus an increase of +10.5% in passenger capacity to 103 billion (ASK)s.

Cargo revenue increased +23.6% to 3.2 billion (RFTK)s against a +22.4% increase in cargo capacity to 5.8 billion (AFTK)s.

For the first six months of this year (BEJ) took delivery of 28 new airplanes comprising Boeing 747-8s, Boeing 777-200Fs and Boeing 737-800s, and retired nine airplanes.

Looking ahead, Air China (BEJ) said it remains optimistic for the aviation market and expects to see solid growth in domestic market demand and international outbound travel. But (BEJ) cautioned that challenges also exist as industry competition further intensifies and currency exchange fluctuations increase.

News Item A-2: Air China (BEJ) began 3x-weekly, Beijing - Geneva service. Air China (BEJ) will start Beijing - Johannesburg nonstop service on October 29, 2015, which will be the first air link offered by a Chinese carrier between Mainland China and South Africa, and also (BEJ)'s first route to Africa. The service will spare Chinese travelers to South Africa the trouble of having to make a transfer en route. With a 14-hour flight, travelers can get to the southernmost point of the African continent to explore the amazing and mysterious Africa.

Founded in 1886, Johannesburg is South Africa's biggest city. Located in the world's biggest gold zone and the epicenter of South Africa's economic activities, Johannesburg accounts for around half of South Africa's industrial output and has earned its reputation as the "City of Gold." It boasts Africa's primitive savannah, but also is at the cutting edge of world trends. The Johannesburg Zoo, Bird Protection Center and diamond factories are always on the "to-visit list" of visitors. Travelers can also be treated to the dances of the hospitable locals.

Spearheading the economy of Africa, South Africa accounts for about one third of Africa's Gross Domestic Product (GDP). It is also China's biggest trading partner in Africa. Currently, approximately 1.2 million Chinese live in South Africa. The latest statistics from Chinese customs suggest that in 2014, the China - Africa connection is important and export volume amounted to US$ 221.88 billion, hitting an all-time high, up +5.5% over the previous year.

The origins of the friendly China - Africa relationship go back to the ancient "Silk Road" of dynastic China's Qin (221 - 207 BC) and Han (202 BC - 220 AD) periods. Today, the "One Belt, One Road" initiative proposed by the Chinese government will bring new opportunities of cooperation between China and Africa. (BEJ)'s forthcoming Beijing - Johannesburg service will be a "Silk Road in the Air" and a new bridge of international cooperation, bringing Asia and Africa closer and facilitating the exchanges between China and Africa.

2015 marks the year when Air China (BEJ) returns to Africa. Back in the 1970's, (BEJ) started its nonstop service to Africa. This year coincides with the South Africa - China Year. Johannesburg will be the first destination (BEJ) will begin to serve on October 29, after many years of absence from the African market, and the new service will further solidify the political, economic and cultural exchanges between China and Africa. This year, (BEJ) will also start Beijing - Addis Ababa service. The two routes are part of (BEJ)'s endeavor to build its global route network with its hub in Beijing, and make it easier for travelers from countries like China, Japan, South Korea, and Singapore to travel to and from South Africa and Africa as a whole and offer additional flight options for travelers.

China Southern Airlines (GUN)’s 3x-weekly, Guangzhou - Nairobi flights are the only scheduled service to Africa, currently offered by a Chinese airline. South African Airways (SAA) did fly this route for more than >3 years before dropping it earlier this year, citing financial losses on the city pair. Air China (BEJ) and (SAA) are Star (SAL) Alliance partners, and (SAA) will place its code on Air China (BEJ)’s flights. Though (SAA) struggled on the route, (SAA) has struggled more broadly, so it may not be a good barometer of how Air China (BEJ) will do on the route. Besides, entering the African market is the key here for (BEJ) and the Chinese government, so initial losses on the route will likely be shrugged off.

This year, Air China (BEJ) continues to build its international presence by starting more international routes. The year 2015 will be one in which (BEJ) starts the largest number of new routes. In addition to the above two new routes to Africa, (BEJ) also started Chengdu - Colombo service in February, Hangzhou - Osaka service in March, Tianjin - Dalian - Sapporo service in April, Beijing - Minsk - Budapest in May, Beijing - Melbourne nonstop service in June and Beijing - Hakodate service in July. These new services have made Air China (BEJ) one of the few carriers in the world that served all the six continents and the only Chinese carrier that does so.

About the Flights:

The flights CA867/8 Beijing - Johannesburg are to be operated on Tuesday/Thursday/Sunday (outbound) and on Monday/Wednesday/Friday (inbound). The outbound flight departs from Beijing at 11:15 pm Beijing time, and arrives in Johannesburg at 7:35 am local time on the following day. The inbound flight departs from Johannesburg at 11:50 am local time and arrives in Beijing at 7:30 am Beijing time. The flights are to be operated with Boeing 777-300ERs, an airplane type quite popular with the world's business (C) travelers. Its First (F) Class and Business (C) Class are outfitted with full-flat seats and a central bar. All classes of service offer personal (AVOD), power outlets, accessible toilets for the disabled, and a mood lighting system which can mimic the sunrise to sunset, guaranteeing a truly pleasant journey for passengers.

About Air China (BEJ):

Air China (BEJ) is China's only national flag carrier and a member carrier of the world's largest airline network (the Star (SAL) Alliance)).

By July 2015, (BEJ) had a fleet of 523 passenger airplanes and freighters of mainly Boeing and Airbus families (including those of the carriers which Air China (BEJ) has a majority stake in). It operates 349 routes, including 87 international routes, 16 regional routes and 246 domestic routes. It serves 168 cities in 35 countries and regions, including 58 international cities, 4 regional cities and 106 domestic cities. Every week, (BEJ) offers over >1.47 million seats on over >7,700 flights per week.

Utilizing its extensive route network and its hub in Beijing, especially after its admission to the Star (SAL) Alliance, (BEJ) can fly passengers to 1,328 airports in 195 countries.

"PhoenixMiles," (BEJ)'s customer loyalty program created in 1994, is Asia's only frequent flyer program shared by a number of carriers.

(BEJ)'s customer service philosophy revolves around four elements: credibility, convenience, comfort, and choice. Hard work over the years has resulted in a tremendous increase in (BEJ)'s brand value. In 2013, (BEJ) ranked again as one of the world's top 500 brands with a brand value of 91.899 billion yuan, and was the only Chinese carrier on the "World Brands 500" list.

News Item A-3: Air China (BEJ) will launch 4x-weekly, Beijing - Mumbai Airbus A330-300 flights from October 25.

The first direct service between Beijing and Mumbai will enable passengers to travel the route in about 7 hours without transferring in Hong Kong or other hubs. “Air China (BEJ)’s Beijing - Mumbai service is an important part of the endeavor to build the Bangladesh - China - India - Myanmar corridor,” (BEJ) said.

The route announcement comes on the heels of (BEJ) confirming its entrance into the African market with flights to Johannesburg starting in October and to Addis Ababa by the end of the year.

Air China (BEJ) and the Chinese government undoubtedly want Beijing to be a true global hub, and have decided that direct flights to Africa and Mumbai are a critical part of making that happen.

September 2015: News Item A-1: Air China (BEJ), China's flag carrier, recently reported its net profit attributable to shareholders surged +730% to 3.938 billion yuan in the first half of 2015, owing to lower fuel prices and strong travel market demand.

(BEJ), the Beijing-based flag carrier registered 12.4 billion yuan revenue on international routes, up +11.16% year on year. It accounted for 27.26% of passenger transport revenue this year, jumping +1.88% from the same period of last year.

Meantime, China's four largest airlines all reported strong growth in (H1) profit this year. China Eastern Airlines (CEA) recorded a 237-fold increase to 3.564 billion yuan for the first six months ended June. China Southern Airlines (GUN) posted a +3.483 billion yuan profit for the first half of 2015, up +440% from the same period of 2014. Hainan Airlines (HNA) earned a net profit of +1.6 billion yuan, 2.3 times as the 2014 (H1) net profit. These four airlines' net profit came in to 12.584 billion yuan, up around +630% year on year.

Chinese airlines are speeding up their efforts to expand international routes. Air China (BEJ) has a obvious advantage in the market competition on international routes. It is the largest carrier on Sino-America and Sino-Europe routes, occupying nearly 50% market share in North America and 60% market share in Europe.

Air China (BEJ) put its main international transport capacity on Europe, Japan, and South Korea for the first half of this year, and started the Beijing - Los Angeles, Beijing - Paris and other services. (BEJ), the flag carrier has kept a +40% growth market share in North America for three consecutive years, and will increase by +26% on this basis this year.

Airline insiders expressed that in the next half year, they will continue their endeavors in launching long-haul routes, especially transcontinental routes, such as Beijing - Montreal, Beijing - Cuba, etc. With the launch of the Beijing - Johannesburg service at the end of 2015, Air China (BEJ) will lead other Asian airlines to fly nonstop to five continents.

Airline insiders also revealed that Beijing's second airport will break the capacity bottleneck of Beijing Capital International Airport (PEK), creating more slot resources for Air China (BEJ), which will further promote the flag carrier's profit growth despite severer competition in international market share among the new Beijing airport-based airlines including (CEA), (GUN), (HNA), etc.

News Item A-2: Air China (BEJ) registered a double-digit growth in passenger and cargo capacity in August to meet strong demand in the peak travel month. (BEJ) announced Available Seat Kilometers (ASK) increased +11.5% in August compared with the same period last year, including +7.9% growth on domestic routes, +20.1% growth on international routes and +0.6% growth on regional routes.

Passenger throughput rose +14.4% year on year. Passenger throughput on domestic routes jumped +11.2%, with that on international and regional routes increasing +22.4% and +1.9%, respectively.

Passenger load factor stood at 84.3% LF, up +2.2% points from a year earlier.

(BEJ) said its cargo capacity as measured by Available Tonne Kilometers (ATK) surged +24.5% year on year in August. Its cargo & mail turnover was up +16.8%, and cargo & mail volume increased +7.6%.

Freight load factor was down -3.5% points to 53.2% LF.

As of the end of August, (BEJ) operated a fleet of 572 aircraft.

News Item A-3: Air China (BEJ) on September 15 started operating its Boeing 777-300ER on the Beijing - Kunming route. It is the first time for the flag carrier to deploy the wide-body airplane on the service.

The 777-300ER, an airplane type popular with the world's business (c) travelers, is the airline's workhorse airplane on its popular long-haul services to Europe and North America.

(BEJ) said it plans to operate the 777-300 airplane temporarily on the Beijing - Kunming service between September 15 - 23, 2015, to provide passengers with a wonderful travel experience.

It is worth noting that (BEJ) deployed a 777-300ER with a special livery of "Love China" for its first day flight, which is the last of 20 777-300ERs introduced by the carrier in October 2014, to celebrate the 65th anniversary of the founding of the People's Republic of China.

Since the first 777-300ER joined Air China (BEJ) in July 2011, the airplane has been favored by global air travelers. (BEJ)'s 777-300ERs are flying internationally to Los Angeles, New York, San Francisco, Washington, Houston, Vancouver, Frankfurt, and Paris, as well as domestic routes from Beijing to Shanghai, Chengdu, and Guangzhou.

In addition, (BEJ) will deploy the 777-300ER on the soon-to-be-launched Beijing - Montreal and Beijing - Johannesburg routes.

News Item A-4: Starting September 29, Montrealers can fly non-stop to China as Air Canada (ACN) and Air China (BEJ) launch their first direct flight to Beijing - - see attached "BEJ-2015-09 - Beijing to Montreal 777-300ER.jpg."

This is also the first non-stop trans-Pacific link between Montreal and Asia. Previously, Montrealers wishing to visit eastern Asia had to make a layover.

Montrealers could reach Asia directly, if they flew over the Atlantic Ocean, with direct flights to Doha, Qatar.

The 777-300ER flights to Beijing non-stop over >10,000 km will take off 3x-weekly, on Tuesdays, Fridays, and Sundays. This is welcome news for the President of the Metropolitan Montreal Board of Trade, Michel Leblanc. "The benefits will come in many forms," he said. "There will be more Chinese students that will be visited by family, more companies that will set up here, and more Quebec companies that will do business in China."

Eastern provinces will also benefit:

China has become Quebec's second largest trading partner, after the USA Trade between Canada and China topped $78 billion last year, with Quebec and the Maritimes making up 20% of that.

The eastern provinces are also expected to benefit from the new flights, especially the agro-food and lobster industries.

Quebec's Economy Minister also praised the new direct link, mostly for its convenient travel times. "I had to get up at 3:00 am to make a stopover in Toronto to go to China," Jacques Daoust said. "Montreal is now a hub for Eastern Canada and northern USA."

Tickets selling well:

Air China (GUN) said that sales have been going well, with 85% of tickets already sold for the first few flights.

The number of tourists traveling from China to Quebec increased +60% last year, (BEJ) said, and it expects the demand to continue.
"The origin of these passengers is very diverse," said He Zhigang, an Air China (BEJ) Director. "We have diplomats, businessmen, but also people who use the link as an entry to the rest of Canada or USA."

News Item A-5: The New Zealand government has cleared a new alliance between Air China (BEJ) and Air New Zealand (ANZ). New Zealand Transport Minister, Simon Bridges said the alliance would lower fares between New Zealand and Beijing and Shanghai, as well as make New Zealand a more attractive destination for Chinese travelers.

(ANZ) said the alliance between the two national carriers will increase capacity between Auckland and Mainland China by more than >25% annually. “China is New Zealand’s second largest inbound visitor market and by collaborating with a strong, well respected home market carrier like Air China (BEJ), we can work together to grow this market, and benefit customers through a new direct link between New Zealand and Beijing,” (ANZ) (CEO), Christopher Luxon said.

(BEJ) (CEO), Song Zhiyong said the relationship between China and New Zealand is going from strength to strength, with increased economic, cultural and political exchanges in recent years. Both carriers have already launched joint sales for a new Air China (BEJ) daily direct service between Auckland and Beijing from December 10.

The two Star (SAL) Alliance carriers would code share on each other’s services between New Zealand and China. Under the terms of the (SAL) alliance, (ANZ) would continue to operate its new Boeing 787-9s on its Auckland - Shanghai route. Air China (BEJ) would use A330-200 aircraft between Auckland and Beijing.

The two flag carriers signed a statement of intent to form an alliance in November 2014. The New Zealand Minister of Transport authorized the alliance through March 31, 2021.

News Item A-6: During a three day official visit by the Chinese President, Xi Jinping to the USA Pacific Northwest, he toured Boeing's 787, 777 and 747-8 final assembly lines in Everett - -
see photo - "BEJ-2015-09 - Chinese President Boeing Visit.jpg."

During his visit, President Xi Jinping stated that Boeing has entered into an agreement with the Commercial Aircraft Corporation of China (COMAC) (CCC) to open a joint venture (JV) facility in China for “interiors completion, paint and delivery of Boeing 737 airplanes for Chinese customers.” The airframes will still be built in Washington state before being flown to China for the completion work.

Boeing Commercial Airplanes President & (CEO) Ray Conner said, “Boeing is expanding our longstanding relationship with Chinese industry to meet vital goals for our company: We are bringing the Boeing 737 closer to our Chinese customers, supporting rising 737 production rates and enhancing our access to China’s dynamic and fast-growing aviation market. The 737 will be a cornerstone of the Chinese fleet for years to come, and we look forward to delivering 737s to Chinese customers in China.”

(COMAC) (CCC) Vice General Manager & C919 Chief Designer, Wu Guanghui added, “The new collaboration between Boeing and COMAC will help advance the Chinese commercial transportation market in a better and faster way, and will benefit the development of supporting Chinese industries related to airplane completion as well as the global growth of China’s civil aviation business.”

Ray Conner noted that “China is our largest international market, accounting for about 1 in 4 of our deliveries so far this year. Going forward, China will be the largest commercial aviation market in the world.”

News Item A-7: (AMECO) Beijing named Chai Weixi as (CEO).

News Item A-8: Beijing Capital International Airport (PEK) plans to open a fourth runway in 2018, according to General Manager, Shi Boli. Construction is expected to be completed at the end of 2017.

The 2,800 m long runway, to be used mainly for landings, will be a short auxiliary runway for the east runway. It is projected to add 8 million passengers yearly, which will increase capacity and ease traffic congestion, Shi Boli said.

(PEK) is expected to handle more than >90 million passengers by the end of 2015, up +22% annually. Currently, (PEK)’s aircraft movement is 89 per hour at peak hours with 1,600 daily flights, which creates an overload with only three runways.

By 2020, Shi Boli said (PEK) aims to handle 285 million international passengers and 175,000 international flights, which will account for 33% of total passenger throughput.

Shi also revealed plans to open more new international routes, including Dublin, Atlanta, and Manchester.

In addition, Beijing’s new airport is also expected to open in 2018 and serve Beijing, Tianjin and Hebei. It will be able to handle an annual passenger volume of 45 million in 2020, 72 million in 2025 and 100 million in the longer term. China’s big three carriers (Air China (BEJ), China Eastern (CEA) and China Southern (GUN)) are all expected to operate out of it.

News Item A-9: Air China (BEJ)’s 50th Airbus A330, which is also China’s first A330-300 with the increased 242 tonne maximum take-off-weight (MTOW) capability, was delivered September 30th. The aircraft, an A330-300 is the first 242 tonnes maximum take-off-weight (MTOW) version to be operated by a Chinese airline. The increased (MTOW) allows airlines to operate longer range at improved operating costs.

Displaying a special livery to celebrate the "50th A330 for Air China", the aircraft is configured with a three class cabin layout (30C business, 16PY premium economy and 255Y economy).

The aircraft, an A330-300 is the first 242 tonnes maximum take-off-weight (MTOW) version to be operated by a Chinese airline. The increased MTOW allows airlines to operate longer range at improved operating costs.

The 242 tonnes A330 is the platform for the future A330neo and offers an extended range of up to 500 nautical miles and up to -2% reduced fuel consumption.

2 737-89L (44921, B-1529; 44922, B-1530), and A330-343 (1658, B-5877), ex-(F-WWYC) deliveries.

October 2015: News Item A-1: Air China (BEJ) plans to introduce a 4x-weekly, Beijing - Kuala Lumpur nonstop from the end of October.

The service will be complemented by an additional four flights to New York from Beijing (also starting at the end of October) to give an 11x-weekly service to the North American hub.

The new Beijing Capital International Airport (BCIA) - International Airport 2 (KLIA2) service will use Airbus aircraft, and the new (BCIA) - Newark Liberty International Airport service will use 777-300ER airplanes.

The new Newark service will add to (BEJ)’s existing 7x-weekly service to New York (JFK) using 747-800 airplanes.

Air China (BEJ) has said it plans to expand its Asian schedules further in coming months with new schedules on Beijing - Mumbai, Beijing - Colombo, and Beijing - Islamabad - Karachi routes. This will bring (BEJ)'s destination count in the Asia-Pacific region to 19.

News Item A-2: Air China (BEJ) starts a Beijing - Colombo service on October 27, 2015. The service gives passengers easy access to the island gem in the Indian Ocean.

Colombo is Sri Lanka's capital and political, economic, cultural and transportation center. Taking a leisurely stroll through the streets of the South Asian coastal city imbued with exotic charms is truly a rewarding experience (flowers are in bloom, coconut trees sway gently in the breeze, fishermen are on stilts, sandy beaches extend, Buddhist pagodas and temples are dotted around, kind and friendly locals make you feel welcome, and aromas of spices waft into the nostrils. Hop onto a century-old train for the world's most beautiful train ride through green tea hills and along the blue sea; onboard, sip on a cup of fragrant Ceylon red tea and take in the breathtaking views along the way, and you will feel you are in a fairytale world.

Currently, China has become Sri Lanka's second largest trading partner and source of imports as well as its fastest growing source of travelers. Statistics released by the Sri Lanka Tourism Promotion Bureau suggest that about 12,000 Chinese travelers visited Sri Lanka in May, up +71.9% year on year. The forthcoming Beijing - Colombo service will open up more travel opportunities for business and leisure travelers from the northern and northeastern parts of China.

Friendship and trading between China and Sri Lanka have been taking place for centuries. Zhe He, the Ming dynasty's legendary sea navigator, paid repeated visits to Sri Lanka on his epic seafaring voyages to the seas in the west. Now, Sri Lanka is an important part of the "21st Century Silk Road on the Sea" on the Indian Ocean.

The timely opening of the Beijing - Colombo service will become an air bridge linking the two nations and contributing to their development in the fields of economy, trading, investment and tourism. Meanwhile, the new route is also one of Air China (BEJ)'s most important moves in 2015 to cement its global presence with its hub in Beijing and expand its route network serving South and Southeast Asia.

(BEJ) will also start other new routes to destinations in the Asia Pacific region including Beijing - Mumbai, Beijing - Islamabad - Karachi and Beijing - Kuala Lumpur. These new routes will bring the number of destinations in the Asia Pacific region that (BEJ) serves up to 19, offering more travel options and benefits to business and leisure passengers traveling between Beijing and other cities in the Asia Pacific region.

About the Flights:

The flights, CA873/4, are operated 3x-weekly on Tuesday, Thursday and Saturday. The outbound flight departs from Beijing at 1:30 pm Beijing time and arrives in Colombo at 7:10 pm local time. The return flight departs from Colombo at 9:10 pm local time and arrives in Beijing at 7:00 am the following day. The flights are to be operated with Airbus 330-300 aircraft. Its Business (C) Class seats can turn into full-flat beds and its Premium Economy (PY) Class seats offer 120% of the legroom of the Standard Economy (Y) Class seats. The ergonomically designed standard Economy (Y) Class seats make travel more pleasant. All classes of service offer personal (AVOD), keeping passengers entertained for the duration of the flight.

News Item A-3: "Air China Starts Newark - Beijing Service" by Hong Xiao, "China Daily" October 27, 2015.

China's national carrier, Air China (BEJ) launched a new 4x-weekly nonstop service between Beijing and Newark at Newark Liberty International Airport (EWR).

The service is operated with (BEJ)'s new-generation three-cabin Boeing 777-300ER and will complement (BEJ)'s 2x-daily service to Beijing Capital International Airport from (JFK) International in New York. "The new Beijing - Newark service is our response to the growing demand from the New York metropolitan area to China and beyond. Transpacific travelers from New York, New Jersey and Connecticut will benefit greatly from this increase in connectivity," said Zhou Yuelong, (BEJ) General Manager.

Cheng Lei, China's acting Consul General in New York, said that in 2014 alone, the number of mutual visits between China and the USA hit a record high of 4.3 million. Put another way, there were 12,000 people traveling across the Pacific Ocean daily. "Naturally, travel means more than the word itself. It means enhancing mutual understanding between the peoples of the two countries and learning each other's culture," Cheng said.

Xue Yaping, Director of the China National Tourist Office in New York, said that China USA tourism has recorded more than >25 million trips between the two nations at an average annual growth of +7.6% since 2007. "This year marks an important year for the China-U.S. relationship," Xue said. During President Xi's recent state visit to the USA, 2016 was officially named the year of China - USA tourism.

"I hope Air China (BEJ) can continue to bring more benefit to the cooperation on tourism between the two countries," Xue said

(BEJ) is now the only airline with nonstop service between New York and Beijing. It is also the only Chinese carrier serving Newark Liberty International Airport.

By the end of 2015, Air China (BEJ) will have nonstop service between Beijing and nine gateways in North America: New York, Newark, Los Angeles, San Francisco, Houston, Washington Dulles, Honolulu, Vancouver, and Montreal. Its 323 passenger routes reach 162 cities in 32 countries across the globe.

As China's exclusive national carrier, (BEJ) is the only airline with the privilege of having the Chinese flag emblazoned on its carriers. In addition to its commercial operations, it also provides special flight services for China's senior government officials on state visits abroad.

News Item A-4: "Air China's New Winter/Spring Schedule Released, with Air Links to All Six Continents" by WCARN.com October 25, 2015.

Air China (BEJ)'s 2015/2016 Winter/Spring Schedule has come into effect on October 25, 2015. The new schedule features 660 flights per week on average, up about +20% compared with its 2014 counterpart, with 110 international/regional passenger routes to 69 international/regional cities. In particular, with the commencement of the Beijing - Johannesburg and Beijing - Addis Ababa routes, (BEJ) will become the only Chinese carrier serving all the six continents:- Asia, Europe, North America, South America, Africa, and Oceania.

Air China (BEJ) announced that it will start Beijing - Johannesburg service on October 29, 2015 and Beijing - Addis Ababa service on November 2, 2015, and at the same time released its 2015/2016 Winter/Spring Schedule. In attendance were South African Ambassador in China, Ethiopian Ambassador in China, Chinese Ambassador in Ethiopia, representatives from South African Airways (SAA) and Ethiopian Airlines (ETH), and (BEJ) VP, Wang Mingyuan.

Johannesburg and Addis Ababa are two important cities in the southern and eastern parts of Africa. The latest statistics from the Chinese customs authorities suggest that in 2014, imports and exports between China and Africa reached a record US$221.88 billion, up +5.5% year on last year. Africa's economic leader, South Africa accounts for one third of Africa's Gross Domestic Product (GDP), and is also China's largest trading partner in Africa. Johannesburg is South Africa's largest city and economic enter. Sitting on the world's largest gold mine, the city has earned its reputation as the "City of Gold." Addis Ababa is home to the headquarters of the African Union. The ideally located city of Addis Ababa is an important hub offering easy access to other parts of Africa. Now, Air China (BEJ)'s two new routes will more closely connect Asia and Africa, help more Chinese companies achieve their global ambitions and serve as an air bridge for travelers looking to explore mysterious Africa.

The (BEJ) VP said that in recent years, air travelers between China and Africa have been increasing at an annual rate of +21.3% to reach 1.415 million. (BEJ)'s two new nonstop routes will further the traditional friendship between China and Africa and meet the ever increasing demand for air travel between China and Africa; they are also Air China (BEJ)'s enthusiastic response to the Chinese government's "One Road, One Belt" initiative. The two new routes not only are the "Silk Road in the Air" linking China and Africa, but also offer more flight options to travelers between Africa and other Asia Pacific regions like Japan, South Korea, and Singapore. He also mentioned that in 2015, (BEJ) has further cemented its global route network with its hub in Beijing by opening over ten new international routes, including Beijing - Minsk - Budapest, Beijing - Melbourne, Beijing - Hakodate, Chengdu - Colombo, Hangzhou - Osaka, Tianjin - Dalian - Sapporo and Beijing - Montreal services. The year will be one with the largest number of newly opened routes in the history of Air China (BEJ). Next, (BEJ) will introduce more international routes. With the new Africa routes, (BEJ) will become the only Chinese carrier serving all the six continents.

Air China (BEJ) also released its 2015/2016 Winter/Spring Schedule which is valid from October 25, 2015 to March 26, 2016. The new schedule features such newly started international routes like Beijing - Johannesburg, Beijing - Addis Ababa, Beijing - Mumbai, Beijing - Colombo, Beijing - Islamabad - Karachi, Beijing - Colombo, Beijing - Auckland, Chengdu - Osaka, Chengdu - Tokyo and Chengdu - Paris, as well as more flights to the existing Los Angeles, Paris and Milan routes and to major Chinese domestic routes. (BEJ)'s domestic routes and international one are laid out to complement each other in a balanced way.

* Starting Flights to Africa, Making Air China a Carrier with Operations to All the Six Continents

Flights Beijing - Johannesburg: The service, CA867/8, is operated on Tuesday, Thursday and Sunday (outbound flights) and on Monday, Wednesday and Friday (return flights). The outbound flight departs from Beijing at 11:15 pm and arrives in Johannesburg at 7:35 am the following day. The return flight departs from Johannesburg at 11:40 am and arrives in Beijing at 7:10 am. The flights are to be operated with Boeing 777-300ER, an airplane type quite popular with the world's business (C) travelers. Its First (F) Class and Business (C) Class are outfitted with full-flat seats and a central bar. All classes of service offer personal (AVOD), power outlets, accessible toilets for the disabled, and mood lighting system which can mimic the wonderful moments from sunrise to sunset, guaranteeing a truly pleasant journey for passengers.

Flights Beijing - Addis Ababa: (BEJ)'s Beijing - Addis Ababa service, CA869/70, is operated 3x-weekly on Monday, Thursday and Saturday. The outbound flight departs from Beijing at 0:40 am and arrives in Addis Ababa at 7:20 am. The return flight departs from Addis Ababa at 2:30 pm and arrives in Beijing at 5:10 am the following day. The flights are operated with A330-200. Its Business (C) Class is outfitted with seats that can turn into full-flat beds and all classes of service offer personal (AVOD), guaranteeing passengers a truly pleasant journey.

* Starting Flights to Appealing Tourist Destinations in Southeast Asia and Oceania

From October 25 to October 27, Air China (BEJ) will start Beijing - Mumbai, Beijing - Kuala Lumpur, Beijing - Islamabad - Karachi and Beijing - Colombo routes. The Beijing - Mumbai flights, CA889/890, are operated 4x-weekly. The Beijing - Colombo flights, CA871/872, are operated 4x-weekly. The Beijing - Islamabad - Karachi flights, CA945/6, are operated 3x-weekly. The Beijing - Colombo flights, CA873/4, are operated 3x-weekly. All these routes will be operated with A330.

Meanwhile, Air China (BEJ) will commence daily, Beijing - Auckland nonstop service CA783/784 from December 10, 2015 and increase its existing 4X-weekly, Beijing - Melbourne service to daily from October 25, 2015. The two routes are all operated with A330-200, an aircraft type outfitted with 28C Business Class seats which can turn into full-flat beds and 199Y Economy Class seats with seat pitch of 32 inches.

* Solidifying the Presence in the Americas

Air China (BEJ) has started Beijing - Montreal nonstop service from September 29, 2015. The flights, CA879/CA880, are operated 3x-weekly, complementing (BEJ)'s Beijing - Vancouver flights. At the same time, (BEJ) will add +4 more flights, CA819/820, per week to its Beijing - New York route, bringing Newark airport into its New York schedule. The new flights, Beijing - Newark plus the existing 2x-daily flights Beijing - (JFK) will offer more convenient travel options to passengers.

Currently, (BEJ) serves 8 destinations in North America, including New York, Washington, Los Angeles, San Francisco, Houston, Vancouver, Hawaii, and Montreal, offering over >140 flights per week operated with 777-300ER and 747-8. In addition, (BEJ) also offers healthy seasonal in-flight meals and (VIP) chauffeured transfers between the airport and downtown for passengers on the China - USA flights. Comfortable cabin environment and attentive services guarantee passengers a truly pleasant travel experience.

* Stepping Up the Capacity in the Southwest Regional Network

Air China (BEJ) is continuing to increase its capacity in its regional hub in China's southwestern city of Chengdu. After starting Chengdu - Colombo service at the beginning of the year, (BEJ) will commence Chengdu - Osaka service on October 25, 2015, Chengdu - Tokyo service on October 26, 2015 and Chengdu - Paris service on December 12, 2015. These new routes will add more spokes to (BEJ)'s regional hub in Chengdu, and represent (BEJ)'s tangible moves to cement its presence in China's southwest region.

In (BEJ)'s 2015 Winter/Spring Schedule, (BEJ) offers from its hub in Chengdu over >110 air links to a total of 71 cities, including 13 international and regional cities, of which 11 like Tokyo, Taipei, Seoul, Singapore, Colombo, Frankfurt, and Paris are served by nonstop flights. (BEJ) has the ambition to make Chengdu a large hub in China and the top hub in southwest China.

News Item A-5: Lufthansa (DLH) aims to make progress on a joint venture (JV) deal with Air China (BEJ), in the making for more than a year, during Chancellor Angela Merkel's visit to China this month.

Karl Ulrich Garnadt, head of (DLH)'s passenger business, will accompany Merkel on the trip, which will include meetings with Premier Li Keqiang and President Xi Jinping.

(DLH) signed an agreement in principle on a partnership with Air China (BEJ) in July 2014, seeking to improve its position in China, the world's second-largest aviation market.

But (DLH) cautioned later in 2014 that it could take until 2016 before the joint venture (JV) is fully up and running, due to the time needed for antitrust approval.

Under the deal, the two partners plan a (JV) that will allow them to share revenue on certain routes by selling tickets for each others' flights. Such arrangements allow airlines to work together on routes and pricing, while sidestepping foreign ownership rules that keep them from merging.

(DLH) has similar agreements with United Airlines (UAL) (part of United Continental Holdings, and Air Canada (ACN), on links between Europe and North America, and with (ANA) on routes to Japan.

November 2015: News Item A-1: Air China (BEJ) reported a 2015 nine-month net profit of +CNY6.28 billion/+$99 million, nearly doubled from CNY3.17 billion in the year-ago period from January to September.

Nine-month operating revenue rose +4.3% to CNY 82.38 billion, while expenses fell -0.7% to CNY75.6 billion.

(BEJ) credited the nine-month profit improvement mainly to capacity increases and lower fuel prices.

However, Air China (BEJ) reported a -13.3% third-quarter net profit decline to CNY 2.33 billion compared to a net income of +CNY2.69 billion in the year-ago quarter. Third-quarter operating revenue increased +4.76% to CNY 31.23 billion. Industry analysts cited yuan depreciation as the main reason for the quarterly profit decline.

Traffic figures were not disclosed for either period.

China’s big three carriers all predicted they would report nine-month profit increases.

News Item A-2: Air China (BEJ) has added another three destinations to its international network from Beijing (PEK). It has added 3x-weekly service to Addis Ababa (ADD) in Ethiopia, Colombo (CMB) in Sri Lanka and Johannesburg (JNB) in South Africa. Direct competition is provided on two of the three routes by Ethiopian Airlines (ETH) (to Addis Ababa) and SriLankan Airlines (LNK) (to Colombo). At 11,702 kms the Johannesburg route becomes (BEJ)’s longest sector, beating the 11,552 km route to Houston Intercontinental in the USA. But that’s still a long way short of the current global record holder, Qantas (QAN)’s 13,802 km service from Sydney to Dallas/Fort Worth.

December 2015: Air China (BEJ), on December 27, began serving Cuba for the first time, when (BEJ), the Star (SAL) Alliance carrier commenced 3x-weekly flights between Beijing (PEK) and Havana (HAV). The 13,061 km service will operate via Montreal in Canada and will be flown by (BEJ)’s 777-300ERs. Flights depart the Chinese capital on Tuesdays, Fridays and Sundays. The launch ceremony in Beijing was attended by representatives from the Cuban Embassy in China, Beijing Capital International Airport and Air China (BEJ).

(BEJ) Vice Chairman, Ms Wang Yinxiang said in her speech that in recent years, the economic and trade ties between China and Cuba have become increasingly closer. The Beijing – Montreal – Havana service has filled a longstanding gap in the aviation market between China and Cuba, aswell as the Caribbean, and will further promote the economic, trade, cultural and tourism development of the two regions, and offer more convenient options for travelers. Air China (BEJ) now serves 10 destinations in the Americas; Havana, Hawaii, Houston, Los Angeles, Montreal, New York (JFK and Newark), San Francisco, Sao Paulo, Vancouver, and Washington.

January 2016: News Item A-1: Air China (BEJ) now serves Taipei Taoyuan (TPE) from Yangzhou (YTY). On January 25, (BEJ) began 3x-weekly (Mondays, Wednesdays and Fridays) flights on the 843 km route using its 737-800s. Competition on the route is provided by Taiwan’s China Airlines (CHI) which operates a weekly service using its 737-800s. As a result Air China (BEJ) now serves Taipei from nine different airports in China. In 2014, Yangzhou Taizhou Airport handled just over >700,000 passengers, making it the 76th busiest airport in China. Apart from Taipei, the airport’s only other international route is to Bangkok with Spring Airlines (CQH).

News Item A-2: Air China (BEJ), the national flag carrier of China, said in an announcement on January 29, the Board has appointed Song Zhiyong as President to succeed Cai Jianjiang, who stepped down from the position to become General Manager of Air China parent, the China National Aviation Holding Company.

Song, 49 years old, started his career in China's civil aviation industry in 1987. He has served as Deputy General Manager and a Member of the Communist Party Committee of China National Aviation Holding Company since December 2010. Before that, he was Vice President, a Member of the Communist Party Committee, and a Member of the Standing Committee of the Communist Party Committee of the Company from October 2006 to December 2010.

Since Cai no longer serves as President of Air China (BEJ), he will serve as a non-executive director of the Company instead of an executive director.

The Board expressed its sincere gratitude to Cai for his significant contribution to the development of the Company during his tenure of office.

Cai replaced Wang Changshun, who has been appointed as Deputy Minister of China's Transport Ministry, to become General Manager of China National Aviation Holding Company.

News Item A-3: "Hainan Airlines (HNA) to Reconfigure 100 Airplanes for Wi-Fi" by (ATW) Katie Cantle, January 15, 2016.

Hainan Airlines (HNA) plans to reconfigure 100 airplanes with in-flight Wi-Fi service in an effort to enhance its passenger experience.

The Haikou-based carrier, in cooperation with Beijing Shareco Technology, will invest CNY1 billion/$152 million to install Wi-Fi over the next two years.

(HNA) General Manager Cabin Service, Xu Fei said it is committed to build a brand-new cabin ecosystem to promote Wi-Fi and provide more new in-flight entertainment (IFE) products with partners that also include Bose and Panasonic. (HNA) uses Bose’s noise-canceling earphones on some international routes and it would promote it on all international long-haul Airbus A330 and Being 787 routes in March.

Other Chinese carriers are also investing in (IFE) products. China Eastern Airlines (CEA) has partnered with Panasonic to provide in-flight Wi-Fi service on international routes from Shanghai to New York, Los Angeles and Toronto since November 2015. Air China (BEJ) plans to invest CNY150 million/$23 million to promote in-flight Wi-Fi. (BEJ) currently provides in-flight Wi-Fi on some domestic business routes, including routes from Beijing to Shanghai and Guangzhou.

News Item A-4: "Air China (BEJ) Orders 6 Boeing 777-300ERs" by (ATW) Katie Cantle, January 7, 2016.

Air China (BEJ) has ordered six Boeing 777-300ERs, worth $2.051 billion at list prices, according to a statement released by the Shanghai Stock Exchange. The new 777s, which will be used for international expansion, are scheduled to be delivered between 2016 - 2017. The deal is subject to Chinese government approval.

(BEJ) noted the deal would increase (BEJ)’s capacities by +5% in terms of (ATK)s as of December 31, 2015.

According to the Civil Aviation Administration of China (CAAC), (BEJ) the Beijing-based carrier has applied to open six international routes in 2016, comprising 3x-weekly, Beijing - Zurich, 7x-weekly, Chengdu - Sydney, 3x-weekly, Chongqing - Dubai, 5x-weekly, Shanghai (Pudong) - San Jose, 4x-weekly, Shanghai (Pudong) - Manchester, and 4x-weekly, Shanghai (Pudong) - Barcelona service.

With this new order, Air China (BEJ) will increase its unfilled airplane orders with Boeing (TBC) to 90 units, which include orders for new 787-9 Dreamliners.

News Item A-5: 737-89L (43410, B-7180), ex-(N1787B), (GEF) leased, 737-89L (44911, B-7182), deliveries.

February 2016: News Item A-1: Air China (BEJ) launched a new flight linking Shenzhen, in south China's Guangdong Province, with Los Angeles, in the USA, on February 1.

It is (BEJ)'s first international service from Shenzhen. The daily flight is served by a Boeing 777-300ER with a stop-over in Beijing. It is the first international route to America from Shenzhen Baoan International Airport since it opened in 1991.

Flights between the two cities will bring more communication opportunities to foster collaboration between people from both sides, said Charles Bennett, Consul-general of the USA Consulate General in Guangzhou, the capital city of Guangdong.

(BEJ) faces no direct competition. For Shenzhen, China’s fifth busiest airport handling almost 40 million passengers last year, it is the first direct service to the USA.

Also, on January 30, Air China (BEJ) began 2x-weekly flights (Saturdays and Sundays) between Hangzhou (HGH) and Ibaraki (IBR) in Japan. The 1,968 km route will be flown by (BEJ)’s A319s. No other carrier serves this route. Ibaraki Airport, located less than <100 km from Tokyo, is currently served by local carrier, Skymark Airlines (SKM), as well as Spring Airlines (CQH) and China Southern Airlines (GUN). Air China (BEJ) thus becomes the airport’s fourth carrier, with a fifth, V Air, set to arrive in mid-March.

News Item A-2: "Air China to Launch Chongqing - Dubai Service in April" by Lena Ge, China Aviation Daily, February 18, 2016.

Air China (BEJ) will launch a nonstop, Chongqing - Dubai service starting April 2016.

According the airline booking system, the new service will be offered 3x-weekly on Mondays, Thursdays and Saturdays, with Airbus A330-200 aircraft Starting April 2, flight CA451 is scheduled to take off from Chongqing Jiangbei International Airport at 6:55 pm and arrive in Dubai at 10:15 pm; while the return flight CA452 will leave Dubai at 0:10 am and land in Chongqing at 11:20 am.

News Item A-3: "Air China (BEJ) Parent Appoints Song Zhiyong as New Party Secretary" by China Aviation Daily, February 29, 2016.

Air China (BEJ) parent, the China National Aviation Holding Company (CNAH) on February 29 named Song Zhiyong as new Party Secretary & Deputy General Manager, a source familiar with the matter said.

Mr Song, currently Air China (BEJ) President, will succeed Wang Changshun, who will steps down from the position due to his advanced age this year.

Mr Song, 50 years old, started his career in China's civil aviation industry in 1987 and served as the Pilot of the Third Group of the Chief Flight Team, the Deputy Captain of the Chief Flight Team and Director of the Training Department of Air China (BEJ).

Mr Song has served as the Deputy General Manager and a Member of the Communist Party Committee of (CNAH) since December 2010, and became President & Deputy Secretary of the Communist Party Committee of Air China (BEJ) since January 2014.

* 2004.09 - 2006.10: Assistant to President, Air China Ltd.

* 2006.10 - 2010.12: Vice President & a Member of the Communist Party Committee, Air China.

* 2010. 12 - Present: Deputy General Manager & a Member of the Communist Party Committee, China National Aviation Holding

* 2014. 02 - Present: President, Executive Director, Air China Ltd.

News Item A-4: (AMECO) Beijing (BEJ) has won a heavy maintenance contract from Condor Airlines (CDF) for its four Boeing 767s. The first Condor 767 will be inducted for "C"-check in April.

Condor (CDF) operates a fleet of 41 aircraft, of which 13 are 767s. (AMECO) started cooperation with (CDF) in 2003 and mainly provides heavy maintenance for its Boeing 767s. During 2009 to 2010, (AMECO) modified winglets on its nine 767-300ER. The latest last heavy maintenance for (CDF) 767s was in last April, the Maintenance Repair & Overhaul (MRO) firm performs "C" check for its two 767s and cabin modification for one 767.

(AMECO) Beijing completed freighter conversions on five Boeing 757-200s in its Chengdu Branch through January 2016. And (AMECO) and Hong Kong Airlines (CRY) have signed a long-term agreement on Airbus A330 heavy maintenance. (AMECO) will provide heavy maintenance for the (CRY)’s A330s from 2015 to 2017. (AMECO) ushered in its second (V2500) for overhaul at the end of January, expecting to do more this year.

News Item A-5: "Air China Posts 18.6% (RPK) Growth in January, Takes Delivery of 5 Aircraft" by Joy Wong, China Aviation Daily, February 19, 2016.

In January, Air China (BEJ) registered a growth in passenger throughput both on a monthly and yearly basis amid strong travel demand around the Chinese New Year, the flag carrier said on February 18.

Available Seat Kilometers (ASK)s climbed +14.0% from a year earlier. Domestic (ASK)s increased +4.0% and international (ASK)s surged +35.5%. (BEJ) deployed +6.9% more capacity on Hong Kong, Macau, and Taiwan routes.

Revenue Passenger Kilometers (RPK)s jumped +18.6% year on year. Domestic (RPK)s increased +6.8%, with international (RPK)s surging +43.7% and that on Hong Kong, Macau, and Taiwan routes rising +21.9%.

Passenger load factor climbed +3.1% points from a year earlier to 79.5% LF.

In cargo traffic, Freight Tonne-Kilometers (FTK)s were up +7.7% and Available Tonne-Kilometers (ATK)s increased +10.0%. Freight load factor declined -1.1% points to 52.6% LF.

Air China (BEJ) launched daily, Guiyang - Sanya service, daily, Guiyang - Tianjin service, as well as 3x-weekly Yangzhou - Taipei service and 2x-weekly Hangzhou - Ibaraki service in the past month.

In January, (BEJ) and its subsidiaries took delivery of five new airplanes, including two Boeing 737-800s, two Airbus A320 aircraft and a business jet. In addition, (BEJ) retired an Airbus A340. As of January 31, the airline group operated a fleet of 594 aircraft.

March 2016: Air China (BEJ) has ordered 12 Airbus A330-300 aircraft, valued at $2.93 billion at list prices. This deal, which still needs government approval, is expected to boost capacities by +5.6%.

(BEJ) is expected to report a +60% to +80% net profit year-over-year increase for 2015, compared to a net income of +CNY3.78 billion/+$614 million in 2014, due to capacity increases, robust market demand growth, a boost in the direct sale of air tickets, effective cost-control measures and lower fuel prices.

March 2016: News Item A-1: Air China (BEJ) has reported a 2015 net profit of +CNY6.77 billion/+$955 million, up +77% compared to net income of +CNY3.82 billion in 2014.

(BEJ) credited lower fuel prices and “exploding” international market demand growth as main reasons for the much-improved performance.

Full-year operating revenue rose +3.85% to CNY108.93 billion, while operating expenses were down -4.8% to CNY83.69 billion, owing to a -30.4% decrease in fuel costs.

Passenger boardings increased +8.2% to 89.8 million with an average load factor of 80% LF, up +0.04 point. Passenger capacity grew +11% to 214.83 billion (ASK)s against a +11.01% increase in passenger revenue to 171.71 billion (RPK)s. Cargo capacity rose +18% to 11.98 billion (AFTK)s, while cargo revenue was up +15.2% to 6.56 billion (RFTK)s.

Last year, Air China (BEJ) introduced 66 aircraft and retired 16 old aircraft. As of December 31, 2015, it operated 590 aircraft with an average fleet age of 6.2 years.

Looking ahead, (BEJ) expects China’s air transport market will continue to maintain rapid growth, but also warns that “increasingly fierce market competition” and exchange rate fluctuations still remain as challenges. In 2015, it recorded CNY5.16 billion in foreign exchange losses.

News Item A-2: Air China (BEJ) will launch nonstop service between Chongqing and Dubai starting April 2, adding its second service to Dubai.

(BEJ) already operates Beijing - Dubai flights. The Chongqing - Dubai flights, expected to be about 7 hours in duration, will be operated 3x-weekly with A330-200s. (BEJ) has signed an agreement with Flydubai (FDB) that will allow its passengers to fly on from to Dubai to destinations such as Riyadh, Baghdad, and Dammam on the same itinerary purchased through Air China (BEJ).

(BEJ) operates to 25 domestic destinations from Chongqing. Dubai will become its sixth international destination from the southwest China city, from which it already flies to Tokyo, Seoul, San Francisco, Hong Kong, and Taipei.

Dubai-based, Emirates Airline (EAD) plans to start 4x-weekly, Boeing 777-200LR flights from Dubai to Yinchuan and Zhengzhou from May 3, adding its fourth and fifth mainland Chinese destinations. (EAD) already serves Beijing, Shanghai Pudong, and Guangzhou from Dubai.

News Item A-3: Air China (BEJ) has submitted an application to the Civil Aviation Administration of China (CAAC) for launching two nonstop international services from Shenzhen Bao'an International Airport to Frankfurt, Germany and Los Angeles, USA.

Pending government approval, starting this April, (BEJ), the Chinese flag carrier will operate the Shenzhen - Frankfurt service with 3x-weekly, using Airbus A330-200 aircraft.

Meanwhile, (BEJ) is also planning to launch the 3x-weekly, Shenzhen - Los Angeles service in October, using its Boeing 777-300ER airplanes.

News Item A-4: Star (SAL) Alliance partners, United Airlines (UAL) and Air China (BEJ) said they have inked a multi-year agreement to extend and expand their strategic partnership.

The airlines said in a joint statement that they are establishing a “joint strategic initiative that will significantly deepen coordination between the two airlines.”

The initiative will include expanding connecting flight opportunities for passengers flying between the USA and China on Chicago-based United (UAL) and Beijing-based Air China (BEJ). The airlines said they will work to create “a more seamless experience for customers when traveling through key gateway airports, such as Beijing and San Francisco.” The carriers said they will also enhance reciprocal benefits for elite frequent flyers and coordinate joint marketing campaigns in the USA and China.

“The new initiative will be led by senior executives from both carriers, who will meet regularly to coordinate new initiative roll outs, promote closer cultural integration between (BEJ) and (UAL), and prepare both companies for future joint opportunities,” the airlines said. “This agreement marks a significant milestone in our long-standing cooperation and further distinguishes (UAL) and (BEJ) as the leading carriers between the USA and China,” (UAL) President & (CEO), Oscar Munoz said.

(UAL) currently serves Beijing, Shanghai, and Chengdu nonstop from San Francisco (SFO) and plans to add +2 more mainland Chinese destinations from (SFO) this year, subject to government approval: Xi'an on May 8 and Hangzhou on July 13.

News Item A-5: (AMECO) Beijing and Ethiopian Airlines (ETH) have signed a three-year contract for engine repair and overhaul services on Pratt & Whitney (PRW) (PW4000)s on seven Boeing 767-300s.

News Item A-6: Air China (BEJ), the nation's flag carrier, plans to sell up to 10 Boeing 777-200 airplanes, according to China Beijing Equity Exchange (CBEE).

Currently, six of ten 777-200s have been grounded for sale, while the other four will operate their last commercial flights in the near future.

Registration numbers for the 10 777-2J6s are (B-2059), (B-2060), (B-2061), (B-2063), (B-2064), (B-2065), (B-2066), (B-2067), (B-2068) and (B-2069).

The 777-2J6, Registration (B-2059), features a special blue Phoenix livery, which is scheduled to make its final commercial flights CA1313/4 between Beijing and Shenzhen on March 26.

Besides, a 747-4J6 airplane, Registration (B-2443) is also listed for sale via (CBEE), with a reserve price of 36.93 million yuan.

News Item A-7: With first Boeing 787-9 Dreamliner delivery to China on May 5, Air China (BEJ) has unveiled the first look at the seating configuration of its stretched Boeing 787-9 Dreamliner.

According to a seat map revealed on the airline website, (BEJ)'s 787-9 will be configured with 293 seats in a three-class layout (30C lie-flat seats in Business (C) Class in rows of 11 - 15, 34 seats in Premium Economy (PY) Class, arranged 3-3-3 from rows 31 through 34, and 229Y Economy seats also stacked 3-3-3 from rows 35 through 61.

(BEJ) is planning to take delivery of its first stretched 787-9 Dreamliner in this May. According to an earlier report by airlineroute.net, (BEJ) will operate its first 787-9 airplane to Frankfurt (July 1), Guangzhou (July 1) and Rome (August 1) after familiarization flights to Shanghai on June 1.

See attached - "BEJ-787-9 - 2016-03.jpg" and "BEJ-2016-03 - Seat Configuration.jpg."

(BEJ) announced its flight schedules in the new summer/autumn season, which identifies Boeing 787-9 preliminary operations.

Starting June 1, (BEJ) is scheduled to deploy its "stretched" 787-9 Dreamliner on domestic Beijing - Shanghai route for familiarization (CA1519/20, CA1549/50). Later, more flights will be served by the 787-9s, including CA1855/56 from September 1 and CA1831/32 from October 1.

Starting July 1, (BEJ) will also deploy the 787-9 on its Guangzhou services (CA1315/16, CA1351/52, and CA1301/02).

Then (BEJ)'s 787-9 Dreamliner will serve international routes: - daily, Sanya - Beijing - Frankfurt route (CA965/6) from July 1, and daily, Beijing - Rome from August 1.

(BEJ) is set to take delivery of its first stretched 787-9 Dreamliner on May 5, with +6 more pending delivery before October 2016.

April 2016: Air China (BEJ) on April 2 began a 3x-weekly service on the 5,039 km sector between Chongqing (CKG) and Dubai (DXB). (BEJ) will utilise its A330-200s on the route which is not served by any other airline. This becomes Air China (BEJ)’s second route to the Middle East as it already serves Dubai non-stop from Beijing with 5x-weekly flights. Dubai, already the world’s busiest airport for international services, now offers non-stop flights to eight destinations in China, although only three of them are served by Emirates (EAD) (Beijing, Guangzhou, and Shanghai Pudong).

China Eastern Airlines (CEA) offers flights to Kunming, China Southern Airlines (GUN) serves Urumqi and Wuhan, while Sichuan Airlines (SIC) serves Yinchuan.

May 2016: News Item A-1: Air China (BEJ) on May 20 began its fourth non-stop service to Frankfurt (FRA). (BEJ) has begun 3x-weekly flights on the 9,114 km route from Shenzhen (SZX). No other carrier operates the route. (BEJ) will fly A330-200s on the route. (BEJ) already serves fellow Star (SAL) Alliance carrier Lufthansa (DLH)’s Frankfurt home hub from Beijing, Chengdu, and Shanghai. Flight CA771 is scheduled to take off from Shenzhen at 23:30 and arrive in Frankfurt at 06:20, with the return flight CA772 leaving Frankfurt at 12:00 and landing in Shenzhen at 05:45 the next day. This is also Air China (BEJ)'s first international service from Shenzhen.

A total of eight Chinese airports are now served this summer non-stop from Frankfurt by Air China (BEJ), China Eastern Airlines (CEA), China Southern Airlines (GUN) and Lufthansa (DLH). This compares with 7x- from Paris (CDG), 6x- from Amsterdam, 5x- from Rome Fiumicino, 5x- from Helsinki and just 4x- from London Heathrow (LHR).

News Item A-2: (AMECO) has carried out its first Sharklet retrofit on an A321 in Chengdu. In addition to Chengdu, the Chinese Maintenance Repair & Overhaul (MRO) facility has begun performing winglet modifications on Boeing aircraft in Beijing, with one winglet installation already completed.

News Item A-3: Air China (BEJ) received its first 787-9 Dreamliner on May 18.

June 2016: News Item A-1: Chinese carriers reported a collective net profit of +CNY32.03 billion/+$4.86 billion in 2015, up +75.1% over the net income of CNY18.29 billion in 2014 in the face of “the slowdown of global economic growth” and “mounting domestic economic downward pressure,” according to Civil Aviation Administration of China (CAAC).

Industry analysts credited “lower fuel price” and “continuous robust growth of market demand, especially market demand on international routes” as the main reasons for domestic airlines’ much improved performance.

Chinese carriers transported a total of 436.18 million passengers, up +10.6% over 2014. Average passenger load factor increased by +0.7 points to 82.1% LF. Cargo traffic volume jumped +5.9% to 6.293 million tonnes.

News Item A-2: See video on A330 Business Class to Sydney:

See video on 747-8 Business Class JFK to Beijing:

See video on 777-300ER Business Class from Vancouver BC Canada:

July 2016: News Item A-1: Air China (BEJ) has filed an application with the Civil Aviation Administration of China (CAAC) to extend its Chengdu - Paris service to Lanzhou, capital of Northwest China's Gansu Province starting August 2016.

Pending government approval, (BEJ) the China flag carrier will operate its Airbus A330-200 aircraft on the international service, with 4x-weekly, according to an announcement released Monday on the website of the (CAAC).

News Item A-2: (AMECO) has merged its Beijing and Chengdu operations into a single aircraft overhaul operation.

August 2016: 777-2J6 (29153, B-2059) withdrawn from use (WFU), 787-9 (34309, B-7832), ex-(N8291V), (Charleston S C #136), and A320-232 (7134, B-8491), ex-(B-OOON) deliveries.

September 2016: News Item A-1: Air China (BEJ) launched nonstop 3x-weekly service from Shanghai to San Jose, California on September 1, a first for Chinese airlines. The flight is operated by Airbus A330-200. The business (C)-class cabin has 180-degree lie-flat seats, and the aircraft is equipped with a personal entertainment system.

(BEJ)’s launch of the Shanghai - San Jose service expands its airline network in America and grows its global airline network with Shanghai as an international port. In addition, it further optimizes and integrates its airline network layout in east China.

In the summer and fall of 2016, Air China (BEJ) serves 36 destinations in Shanghai, of which 14 are international and regional flights and 22 are domestic.

Domestic airlines took delivery of +280 more new aircraft in 2015, expanding the total fleet to 2,650 aircraft as of December 31, 2015.

China’s 4 major carriers all reported big profit increases in 2015. Air China (BEJ) has reported a 2015 net profit of +CNY6.77 billion/+$955 million, up +77% compared to net income of +CNY3.82 billion in 2014, while China Eastern Airlines (CEA) reported a net profit of +CNY4.54 billion/$64 million in 2015, up +33% compared to net income of +CNY3.42 billion in 2014. China Southern Airlines (GUN) reported a net profit of +CNY3.85 billion/+$593 million in 2015, more than doubled from a net income of +CNY1.77 billion in 2014. Hainan Airlines (HNA) reported a 2015 net profit of +CNY3 billion/+$462 million in 2015, up +16% from a net income of +CNY2.59 billion in 2014.

News Item A-2: "Lufthansa, Air China Finalize Joint Venture."

Lufthansa (DLH) and Air China (BEJ) agreed to set up a joint venture (JV) covering routes between China and Germany on September 20. The two airlines signed an agreement covering the initiative in 2014; negotiations took two years to finalize. The deal will go into
effect in summer 2017.

The project is part of (DLH)’s strategy to protect key longhaul markets by entering deep partnerships. (DLH) is already part of the “A++” joint venture with United (UAL) and Air Canada (ACN), which includes (DLH) affiliates Swiss International Air Lines (CSR), Austrian Airlines (AUL) and Brussels Airlines (DAT)/(EBA). It also has similar deals with All Nippon Airways (ANA) and Singapore Airlines (SIA). (DLH) believes these deals can better fend off competition, in particular from the three big Gulf carriers.

(DLH) and (BEJ) have been partnering for years though code sharing, Star (SAL) Alliance membership and the (AMECO) joint venture for maintenance, repair and overhaul (MRO). As part of the agreement, the two carriers plan to expand code sharing and to cooperate more closely on frequent flyer programs and key corporate accounts.

Jens Flottau, jens.flottau@aviationweek.com

News Item A-3: Beijing Airport is still #2 after Atlanta, USA; 100 million passenger milestone may not be reached before new airport opens; Air China (BEJ) is the dominant carrier. Beijing Airport, as China’s busiest airport grew by +4.4% last year to reach almost 90 million passengers.

Beijing Capital International Airport is the world’s 2nd busiest after Hartsfield-Jackson Atlanta International Airport. The Chinese facility handled almost 90 million passengers in 2015 which represented growth of +4.4% compared with the previous year. Having seen passenger numbers more than double in just 6 years between 2004 and 2010 (when double-digit growth was achieved in 5 of the 6 years), the airport’s growth has slowed in recent years because of capacity constraints. This has led to the planning of a 2nd major airport for the Chinese capital which is due to open in the 1st quarter of 2019. As a result, the airport may struggle to reach the 100 million passenger milestone. Indications are that Air China (BEJ) (a Star (SAL) Alliance member) will stay at the current airport, while China Eastern Airlines (CEA) and China Southern Airlines (GUN) (both members of the SkyTeam (STM) Alliance) will move to the new airport, which will be capable of handling 45 million passengers by 2020.

Passenger numbers at the airport in the 1st half of 2016 are up +3.5% to 45.6 million. Domestic routes have consistently accounted for between 75% and 80% of annual seat capacity at the airport, although this has fallen slightly to an estimated 73% in 2016. Air China (BEJ) has almost 40% of capacity at Beijing

Air China (BEJ) is the dominant carrier at the airport with around 38% of seat capacity during the current summer season. This is well ahead of China Southern Airlines (GUN) (14%) and China Eastern Airlines (CEA) (12%). The only other carrier with >3% of the market is Hainan Airlines (HNA) with almost 10%. The leading foreign carriers are Dragonair (DRG), Korean Air (KAL) and United Airlines (UAL). >80 airlines have operated scheduled services at the airport this summer.

Analysis of the airport’s route network by country reveals that the USA remains Beijing’s biggest international country market with >1.2 million departing seats during the current summer season. Hong Kong and South Korea are also both served by >1 million seats this summer. Among the top 12 international country markets, the fastest-growing this summer have been Malaysia (+46%), Canada (+32%), Thailand (+22%) and the UK (+20%). Malaysia’s growth is down to Air China (BEJ) starting a 4x-weekly A330 service to Kuala Lumpur last October, as well as AirAsia X (ASX) increasing frequency on the route, which is also served by Malaysia Airlines (MAS).

Canada’s growth is thanks to new services to Calgary (by Hainan Airlines (HNA) and Montreal (by Air China (BEJ)). Thailand’s growth has been generated by increased capacity on existing routes to Bangkok and Phuket, while UK growth was driven by Hainan Airlines (HNA)’s new non-stop service to Manchester which launched in early June.

Just >60 countries were served with non-stop flights this summer. New country markets added during the last 12 months include New Zealand, the Seychelles and South Africa. Air China (BEJ) began flights to Johannesburg last October and Auckland last December, while Air Seychelles (ASY) began a weekly service in February of this year.

As the airport serving the country’s capital, Beijing Airport has an extensive domestic network. This summer it offers flights to >120 destinations in the rest of China, a figure which has grown during the last 12 months with the addition of 8 new destinations, not previously served.

New international routes already planned to start between now and the end of the year include Air China (BEJ) heading for Warsaw (starting this month), Hainan Airlines (HNA) venturing into Las Vegas in December, and Delta Air Lines (DAL) offering non-stop service from Los Angeles.

October 2016: Air China (BEJ) agreed to sell 3 new 777-300ERs and 2 new A330-300s (for delivery in (4Q16) to (BOC) Aviation (SIL) for leaseback.

November 2016: News Item A-1: Air China (BEJ) has officially launched a nonstop service between SW China's Chengdu and Sydney, Australia, becoming the 1st direct route between the 2 cities. (BEJ)'s inaugural Chengdu - Sydney flight CA429, was operated by Airbus A330-200 (B-6541) configured with 30C business class and 207Y economy class seats.

Flight CA429 is scheduled to depart Chengdu every Tuesday, Friday and Sunday at 10:55 am and arrive in Sydney at 12:35 pm the following day. Following a brief layover, flight CA430 will take off from Sydney at 2:35 pm and touch back down in Chengdu at 10:35 pm. "This new 3x-weekly route to Sydney marks Air China (BEJ)'s 3rd intercontinental flight from Chengdu and (BEJ)'s 1st nonstop service between western China and Oceania," said Rui Jie, (BEJ) General Manager Australia.

Currently, Air China (BEJ) flies from Sydney to Beijing, Shanghai and Chengdu. It also offers nonstop service from Melbourne to Beijing and Shanghai, with flights to Shenzhen due to start in January 2017.

With increasing demand from both the business and leisure market, Air China knows the introduction of the direct Sydney to Chengdu service will help support this demand. "As the 1st Chinese airline to operate into Australia and having flown between China and Australia for the last 32 years, (BEJ) has seen firsthand the increasingly strong growth and development of services between our countries."

News Item A-2: (BOC) Aviation (SIL) has delivered a Boeing 777-300ER to Air China (BEJ), the 1st in a batch of 5 airplanes leased to (BEJ) under a purchase-and-leaseback arrangement 1st announced in October.
The deal consists of 3 777-300ERs and 2 Airbus A330-300s, all of which will be delivered new from the manufacturers by the end of 2016.

The transaction will use all of the equity raised in (SIL)’s initial public offering (IPO) earlier this year. (SIL)’s Managing Director & (CEO) Robert Martin said the deal “adds popular, in-demand airplanes on long-term leases to our portfolio.” “This transaction also represents incremental capital expenditure in 2016, and we continue to focus on disciplined investing to grow our fleet in line with our current strategy.”

(BOC) Aviation (SIL) has a fleet of 484 airplanes owned, managed or on order.

News Item A-3: Chinese carriers have accelerated their international expansion pace as outbound travel continues to grow.

In October, Beijing-based Air China (BEJ) experienced a +18.6% year-over-year (YOY) growth in (RPK)s on international routes. Shanghai-based China Eastern (CEA) reported a +30.4% (YOY) growth; Guangzhou-based China Southern (GUN) posted a 23.9% (YOY) growth; and Haikou-based Hainan Airlines (HNA) saw a 47.4% (YOY) growth.

Air China (BEJ) transported 11.2 million passengers on international routes in October, up +23.2% (YOY); China Eastern (CEA), 12.1 million, up +17.2% (YOY); China Southern (GUN), 11.6 million, up +19.1% (YOY); and Hainan Airlines (HNA), 18.7 million, up +57% (YOY).

In September, domestic airlines transported 4.2 million passengers on international routes, up +19.9% (YOY), which outpaced a +13% growth on domestic routes.

Hainan (HNA) opened 2x-weekly Xi'an - Sydney and Changsha - Sydney routes in September and 2x-weekly Haikou - Da Nang services in October.

China Eastern (CEA) opened 13 international routes in the (1H) and +2 European routes to St Petersburg and Madrid, in addition to boosting flight frequencies on routes to Europe and the USA.

Industry analysts point out domestic airlines still need to face severe challenges including overcapacity; shortage of slots and aviation professionals, such as pilots (FC) and Maintenance Repair & Overhaul (MRO) (MT) staff; and should focus more on profits than market shares, when they speed up their international expansion pace.

December 2016: News Item A-1: Air China Limited (BEJ) registered +8.2% growth in passenger throughput in November 2016, with passenger capacity increasing +6% year on year.

In November, (BEJ) the Chinese flag carrier handled about 7.74 million people and 164,946 tonnes of cargo and mail, up +8.7% and +10.9 year on year, respectively. Passenger capacity measured by Available Seat Kilometers (ASK) increased +6% from a year earlier. Domestic (ASK) and passenger traffic increased +10.5% and +11.4%, respectively, as compared to the same period last year. For international routes, passenger capacity and passenger traffic increased +0.6% and +4.4%, respectively. (BEJ) deployed -10.2% less capacity on Hong Kong, Macau, and Taiwan routes in November.

Meanwhile, Revenue Passenger Kilometers (RPK) rose +8.2% year on year in November. Domestic (RPK) increased +11.4%, with international (RPK) climbing +4.4% and that on Hong Kong, Macau, and Taiwan routes declining -8.4%. The overall passenger load factor rose +1.6% points from a year earlier to 79.7% LF.

In cargo traffic, both cargo and mail traffic, measured by Revenue Freight Tonne Kilometers (RFTK), was up +11.8% and cargo capacity, measured by Available Freight Tonne Kilometers (AFTK), grew by +8.5% year on year. Cargo and mail traffic increased by +11.8% and volume of cargo and traffic rose by +10.9% from a year earlier. Freight load factor rose +1.7% points to 58.3%.

Air China (BEJ) has launched 4x-weekly Tianjin - Urumqi - Gulja service on November 1, 3x-weekly Chongqing - Huai'an - Changchun route on November 2, and a 3x-weekly Chengdu - Sydney route on November 11.

In November, (BEJ) and its subsidiaries took delivery of 3 Boeing 737-800s, 2 777-300ERs, 2 Airbus A320s and 1 A330, with the retirement of a 737-800 and 1 business jet. As at the end of November 2016, the airline group operated a fleet of 622 aircraft.

News Item A-2: Beijing Capital International Airport, the world's 2nd busiest airport in terms of passenger traffic, is estimated to handle about 670,000 people and 4,581 aircraft movements from December 31 to January 2, with 223,000 passengers and 1,527 aircraft movements every day.

The 3-day New Year holiday is expecting a travel rush due to the rise in family groups, senior citizens and children. It is predicted by analytical statistics that from December 31 to January 2, 335,000 people will depart from Beijing Capital Airport, including 232,000 on domestic and 103,000 on international flights. Meanwhile, another 335,000 travelers will arrive in Beijing, including 225,000 domestic and 82,000 international passengers.

Before the holiday, the passenger and aircraft movements are expected to reach a peak on December 30 with 269,000 passengers and 1,737 aircraft movements. The peak after New Year holiday may appear on January 3 with over 615,000 passengers and 1,694 aircraft movements.

Passengers were advised to arrive in the airport at least 2 hours prior to their departures and reminded on lithium batteries and carry-on luggage.

Due to safety concern, lithium batteries including portable power banks must be carried in carry-on luggage. Cigarette lighters and matches are not allowed in any situation, Beijing Capital Airport said.

News Item A-3: "China's Fastest Subway Starts Construction in Beijing" by Wu Yan, "China Daily" December 28, 2016.

Beijing's new airport subway line, which will become the fastest subway train in China, began construction on December 26, "Beijing Daily" reported.

The 41.36 km subway line is expected to be ready for operation in September 2019. The new line will include 3 stations and will connect the Beijing Daxing International Airport, which is currently under construction, and Caoqiao subway station near Beijing's south 3rd ring road.

Compared to the current travel speed of most subway trains in Beijing, which is 33 to 35 km per hour, "the designed speed of the subway train on the new line is 160 km per hour, and the travel speed reaches 110 km per hour," said a director at the Beijing (MTR) Construction Administration Corporation.

The entire journey will take just 19 minutes, which includes the train's running time and station dwelling time. Caoqiao station, a transfer station that will connect 4 subway lines in the future, will be built into an airport terminal for passengers to manage check-in procedures. The station has a passenger flow volume of 20 million a year, and the efficiency of check-in procedures will be equivalent to that of terminals at the airport.

The Cigezhuang station and the North Airport Terminal station will connect inter-city railways to coordinate the traffic of the Beijing - Tianjin - Hebei area.

January 2017: 2016 passengers: 96.59 million (+7.6%). 2016 (2015) passenger traffic: 188.14 million (171.70 million). +9.7%. 80.7% LF.
2016 freight traffic 7.00 million, +6.6%.

A321-232 (7511, B-8799), ex-(D-AVZR) delivery.

February 2017: News Item A-1: American Airlines (AAL) is calling for the USA Department of Transportation (DOT) not to renew Air China (BEJ)’s route authority for a Beijing - Houston flight until the Civil Aviation Administration of China (CAAC) gives (AAL) slots for its planned Los Angeles - Beijing flights. In a regulatory filing to the (DOT), (AAL) noted Beijing-based Air China (BEJ)’s application is not wrong, and within the bounds of the law.

News Item A-2: Air China (BEJ) will inaugurate on May 5th, its 2nd route to China from Barcelona-El Prat Airport with a direct flight to the economic capital of the country: Shanghai. Flights will be operated 3x-weekly with an Airbus 330-200 with 16C business class seats and 239Y economy class seats. All 3 weekly frequencies will be return on Tuesdays, Fridays and Sundays. Flights will depart from Barcelona Airport at 12:30 pm to reach Shanghai-Pudong at 6:40 am of the next day on Fridays and Sundays. On Tuesdays the flight will depart from Barcelona Airport at 11:45 am to reach Shanghai Pudong at 5:55 am the next day. The return flight will depart at 0:30 am to land in Barcelona at 8:00 am of the same day.

The schedule has been especially programmed not just to be adapted to the business traveler needs, but as well to allow better connection at Shanghai airport. This way, business traveler will be able to reach Shanghai on Monday at 1st and return to Barcelona on Friday of that same week.

Additionally, from Pudong International Airport, passengers will have at their disposal, fast and excellent international connections to Japan, Taiwan, Australia, and New Zealand, plus also domestic connections to Chengdu, Wenzhou, Fuzhou, and Guangzhou.

With this brand new destination, the 2nd served by Air China (BEJ) from Barcelona-El Prat, (BEJ) is covering a route widely demanded by several social sectors and businesses from Barcelona due to the strong business ties with Shanghai and its surroundings. In 2016 about 100,400 passengers flew from Barcelona to Shanghai with a layover at some point.

* Special Offer: To welcome this new route, Air China (BEJ) has launched excellent offers to travel to Shanghai for the 1st time from Barcelona with no layover. Economy (YT) class tickets (always return and with all taxes and fees included) can be bought from EUR443, while Business (C) class seats tickets are available from EUR2,043.

* Second Route from Barcelona

Air China (BEJ) began just 3 years ago (on May 5) its 1st route from Barcelona to China, specifically to Beijing. Those flights (4x-weekly) with a stopover in Vienna started an uncovered route and have had a broad demand since then. Now, with the opening of the direct flight to Shanghai, Air China (BEJ) has strengthened its commitment to Barcelona-El Prat Airport, one of the top-growing airports in all of Europe.

737-89L (43424, B-1417) (GECAS) (GEF) leased, 787-9 (34312, B-1591) (Charleston #162), and A321-232 (7557, B-8800), ex-(D-AZAW) deliveries.

April 2017: China's national airline, Air China (BEJ) has canceled some flights to the North Korean capital, Pyongyang, due to poor demand but it has not suspended all flights there, it said on April 14, denying a report by Chinese state broadcaster (CCTV).

(CCTV) had reported that all flights run by (BEJ) between the 2 cities were to be suspended indefinitely. "Air China (BEJ) did not stop operation of the Beijing to Pyongyang route, but temporarily canceled some flights based on the situation of ticket sales," said a person in (BEJ)'s communications team.

Subsequent flights would be scheduled according to ticket sales, the official said.

(BEJ)'s flights, which operate on Monday, Wednesday and Friday, began in 2008 but have frequently been canceled due to unspecified problems, (CCTV)'s report said.

China is North Korea's sole major ally but it disapproves of the North's weapons programs, and its confrontations with the USA and its Asian allies, and it has supported (UN) sanctions against it.

Following repeated missile tests that drew international criticism, China banned all imports of North Korean coal on February 26, cutting off North Korea's most important export producer.

May 2017: News Item A-1: Air China (BEJ) reported a (1Q) net income of +CNY1.5 billion, down -39.8% over net income of +CNY2.44 billion in the (1Q) 2016. Operating revenue rose +10% (YOY) to CNY29 billion against a +17% increase in operating expenses to CNY23.4 billion. Besides the higher fuel costs, (BEJ) also posted a -CNY141.6 million loss in equity investment, in contrast with the +CNY330.7 million profit in investment gains for the same period last year.

News Item A-2: Air China (BEJ) on May 5 began non-stop service between Shanghai Pudong (PVG) and Barcelona (BCN). The 9,860 km route will be served 3x-weekly by (BEJ)’s 254-seat A330-200s. The date also marked the 3rd anniversary of (BEJ)’s 1st service from Beijing to Barcelona which operates via Vienna.

Only 4 European airports are served non-stop by (BEJ) from both Beijing and Shanghai: Frankfurt, Milan Malpensa, Munich, and Paris (CDG). Apart from Barcelona, it also serves Madrid from Beijing. On all routes between China and Europe, (BEJ) is the market leader currently accounting for 22.3% of seat capacity, followed by Lufthansa (DLH) (10.4%) and China Eastern Airlines (CEA) (8.6%).

28 airlines currently offer non-stop flights between China and Europe. A decade ago the figure was 20 with (BEJ) still having just <23% of the market.

News Item A-3: (AMECO) delivered a converted Boeing 757 airplane to China Postal Airlines (CPZ). This is the 6th Boeing 757 airplane delivered by (AMECO) Chengdu Branch since 2014, while another 3 757s are in the progress in its facility.

May 2017: 737-89L (60867, B-1418), delivery.

July 2017: China Eastern Airlines (CEA) plans to allocate 150 - 200 aircraft to Beijing’s new airport in Daxing, which is expected to open in 2019. The airport has not yet been named.

(CEA) said the aircraft would be a mix of narrow bodies and wide bodies, which would operate on domestic Hong Kong, Macau and Taiwan routes and international routes to America, Europe, Australia, Japan, Korea and SE Asia. (CEA) currently has no direct intercontinental long-haul service from Beijing.

China Eastern (CEA) will invest CNY13.2 billion/$1.9 billion in its infrastructure at the new airport in an effort to enhance its position in the Beijing market. (CEA) previously said it plans to designate Beijing’s new airport as its core strategic hub for the most profitable Beijing - Shanghai route. This should increase the number of long-haul routes from Beijing and strengthen cooperations with other SkyTeam (STM) Alliance members.

(CEA) has also signed a framework cooperation agreement with the local Daxing government to cooperate in areas including (MRO), logistics, air catering and aviation media.

China Southern (GUN) has had a cooperation agreement with the Beijing government as early as 2011 to allocate 200 Airbus A330s and A380s to the new airport over the next 10 years.

China Eastern (CEA) and China Southern (GUN) are expected to build their own infrastructures at Beijing’s new airport based on their respective passenger boardings. This would account for 40% of the airport’s annual passenger volume (which is projected to be 45 million in 2020, 72 million in 2025 and 100 million in the longer term).

Air China (BEJ) and other Star (SAL) Alliance member carriers (including Hainan Airlines (HNA)) are expected to remain at Beijing Capital Airport, which has a slot shortage.

737-8Z0 (30073, B-2511), returned to lessor.

August 2017: News Item A-1: A 7.0-magnitude earthquake struck at a depth of 20 km in Sichuan's Jiuzhaigou County at 21:19 on August 8.

Jiuzhai Airport, completed in 2003, is an important connection point in Jiuzhai County. Because Jiuzhai Airport is a high-altitude airport which requires higher qualifications of airplanes and pilots (FC), not every airline can operate flights at such a high altitude. The jet airplanes that are qualified to fly to Jiuzhai Airport include Airbus A319s and Boeing 737-700s.

Air China (BEJ), Lucky Air (LKY), Tibet Airlines (TBZ), China Eastern Airlines (CEA), Chengdu Airlines (UEG), Sichuan Airlines (SIC) and West Air (CHO) are operating or have operated Jiuzhaigou routes. All of these 7 airlines have the capability to perform earthquake relief missions. After the earthquake, these 7 airlines flew to the stricken area to carry out stranded passengers in a timely manner.

News Item A-2: See 747-8i video:

Air China (BEJ) 747-8i (B-2481) takeoff to New York (JFK).

September 2017: Air China (BEJ) and China Southern Airlines (GUN) were impacted by higher fuel prices in the 2017 1st half as the 2 carriers reported year-over-year (YOY) 6-month net profit decreases of -3.8% and -11.6%, respectively, to CNY3.3 billion/$486 million and CNY2.8 billion.

(BEJ)’s (1H) operating revenue rose +8.7% (YOY) to CNY58.2 billion, while operating expenses rose +15.8% to CNY47.7 billion. Fuel costs jumped +40.1% (YOY) to CNY13.6 billion during the period.

(GUN)’s (1H) operating revenue grew +11.5% (YOY) to CNY60.3 billion, while operating expenses increased +20% to CNY53 billion. Fuel costs rose +50.1% to CNY15.4 billion.

Air China (BEJ)’s passenger boardings were up +5% (YOY) to 49.2 million with an average load factor of 81% LF, up +1.2 points over the year-ago period. Passenger capacity rose +5% (YOY) to 119 billion (ASK)s, while traffic rose +6.5% (YOY) to 96.4 billion (RPK)s. Cargo traffic volume grew +4.7% (YOY) to 873,733 tonnes.

China Southern (GUN) transported 52 million passengers in the (1H), up +12% (YOY), with an average load factor of 82.3% LF, up +2.2 points. Passenger capacity increased +9.4% (YOY) to 134.5 billion (ASK)s, while passenger traffic jumped +12.5% to 110.7 billion (RPK)s. Cargo traffic volume increased +7.8% to 810,480 tonnes.

(BEJ) introduced 16 aircraft during the January - June period, comprising 1 Airbus A330-300, 4 737-800s, 8 A320 family aircraft, 2 Boeing 787-9s and 1 737-700. It phased out 11 older airplanes during the period, expanding its total fleet to 628 airplanes with an average age of 6.5 years.

(GUN) took delivery of 28 aircraft, consisting of 1 Airbus A330-300, 12 A320 family aircraft, 2 787-9s and 13 737-800s. (GUN) retired 13 older airplanes, expanding its total fleet to 717 airplanes with an average age of 6.7 years.

October 2017: "Europe Eyes Potential of Flying Visits" by Fu Jing, China Daily, October 10, 2017.

Despite the threat of terrorist incidents, Chinese tourists continue to flock into European countries, and Chinese airlines have been responding to the demand by launching new direct flights to European destinations.

On September 30, Air China (BEJ), China's national carrier, introduced direct flights between Beijing and Athens, Greece. Hainan Airlines (HNA) will launch non-stop flights between Shanghai and Brussels on October 25 and China Eastern Airlines (CEA) will commence flights between Xi'an and Prague on October 29.

The flights between Shanghai and Brussels will be (HNA)'s 2nd route to the Belgian capital, as it also flies between Beijing and Brussels.

Prague is already linked by direct flights with Beijing, Shanghai and Chengdu, capital of Sichuan province, and by the middle of next year, the Czech capital, according to the schedule, will be connected by direct flights with 6 Chinese cities. That will make it stand out among Central and Eastern European countries, and many Western European countries as well.

The Czech Republic aims to become a regional aviation center, and it is keen to grasp the opportunities presented by expanding its aviation and tourism cooperation with China.

In terms of number of direct flights linking Chinese cities, Prague could even compete with London, Paris and Frankfurt, the established airport hubs in Western Europe.

On the demand side, the number of Chinese tourists traveling to Europe, according to official statistics, increased by 65% year-on-year during the 1st half of this year. It is an upward trend that is set to continue, because it is not just the residents of the large Chinese cities that are traveling overseas but even those of county-level towns.

Also the governments of both sides, especially the top leaders, have shown their determination to deepen such cooperation and boost tourism, economic and trade exchanges.

The Czech Republic is well prepared to tap the potential of the growing number of Chinese travelers. But other European countries will be able to do so as well since the number of Chinese tourists to Europe is huge and still growing.

According to official data, there are 600 flights between China and Europe every week. A number that will only increase over the coming decade, as China is set to become a medium-and high-income country in a few years in line with (UN) standards.

And it is not just Chinese tourists that Europe is hoping to attract. Poland, for example, has recently proposed a 10-year plan to build a hub airport between its capital Warsaw and the city of Lodz, and Chinese investors are being courted to participate in the project.

At the same time, the aviation industry itself will benefit from the predicted growth in the number of Chinese travelers. According to an official forecast, China will need to increase its fleet from the current 2,950 aircraft to >7,000 in 20 years. No other country will have such a demand for aircraft and the European aircraft manufacturer Airbus (EDS) will be 1 of those tasked with meeting the demand.

In seeking beneficial opportunities from the growing number of Chinese tourists traveling overseas, the Czech Republic is setting a good example for other European countries.

Fleet:
(definitions)

Click below for photos:
BEJ-737 MAX - 2015-03.jpg
BEJ-737-3J6
BEJ-737-66N
BEJ-737-700
BEJ-737-79L
BEJ-737-800 - 2011-11
BEJ-737-800 08 OLYMPICS A
BEJ-737-800 08 OLYMPICS B
BEJ-737-800-2014-08
BEJ-737-89L-MAR09
BEJ-747-400 HKG LDG
BEJ-747-400F
BEJ-747-412F
BEJ-747-4J6 - 2012-02
BEJ-747-8 - 2014-08
BEJ-747-8I - 2014-09
BEJ-747-8I - 2014-09-A
BEJ-747-8i.jpg
BEJ-757-2ZO
BEJ-767-33AER
BEJ-777-200 Retirements-2017.jpg
BEJ-777-29L
BEJ-777-2J6 - B-2059 - 2016-03.jpg
BEJ-777-2J6-APR09
BEJ-777-2J6-JAN09
BEJ-777-300ER - 2011-03
BEJ-777-300ER - 2013-04
BEJ-777-300ER - 2013-12
BEJ-777-300ER - 2014-09
BEJ-777-300ER - 2016-02.jpg
BEJ-777-300ER - SMILING CHINA - 2012-10
BEJ-777-39LER - 2012-02
BEJ-777-39LER - 2013-08
BEJ-777-39LER - 2013-10
BEJ-777-39LER - 2013-11
BEJ-787-8A
BEJ-787-9 - 2015-06.jpg
BEJ-787-9 - 2016-03.jpg
BEJ-787-9 - Seat Configuration-2016-03.jpg
BEJ-A319
BEJ-A319-A
BEJ-A320-214
BEJ-A321-DEC08
BEJ-A330
BEJ-A330 - 50th-2015-09.jpg
BEJ-A330-200 - 2016-11.jpg
BEJ-A330-200-MAY08
BEJ-A330-DEC08
BEJ-C919-2010-11

October 2017:

6 737-3J6 (CFM56-3B1) (1224-23302, /86 B-2531; 2768-27518, /96 B-2954; (CSC) LSD), 27631; 27045; 25891 WET-LST (IML). 8F, 116Y.

4 737-3J6 (CFM56-3B1) (2002-25078, /91 B-2535; 2016-25079, /91 B-2536; 2254-25080, /92 B-2580; 2263-25081, /92 B-2581), (CSC) LSD, WET-LST (TJA). 8F, 116Y.

2 737-3Q8 (CFM56-3C1) (2764-26321, B-; 2786-26333, /96 B-2604, 2004-07), EX-(TCV), (ILF) LSD. 26321; 26333; TO BELAVIA (BLV) 2009-01. 12F, 112Y.

4 737-33A (CFM56-3B2) (2360-25506, /92 B-2905; 2373-25507, /92 B-2906; 2414-25508, /93 B-2907; 2599-25511, /94 B-2947), LST (IML) 1997-09. 8F, 116Y.

3 737-36E (CFM56-3C1) (2706-26315, /95, 2004-01; 2706-26315, B-2627, 2004-04; 2719-26317, /95, B-2603 2004-04), EX-(AEY), (ILF) LSD. 148Y.

1 737-36M (CFM56-3) (2810-28333, B-2504), (GEF) LSD 2005-03.

2 737-36N (CFM56-3C1) (2976-28672, /97 B-5035; 2995-28673, /98 B-5036), (GEF) LSD 2003-01. 8F, 116Y.

0 737-36N (CFM56-3C1) (2835-28554, B-2600; 2876-28558, B-2614), (GEF) LSD. 28554; 28558; RTND.

2 737-36Q (CFM56-3) (28664; 28761), (SHG) WET-LSD 2005-01.

1 737-36Q (CFM56-3) (3020-29326, B-2630), (BOU) LSD 2004-07.

6 737-600 (CFM56-3).

2 737-7BX (CFM56-7B24) (658-30736, B-5063, 2004-11; 687-30737, B-5064 2004-12), EX-(AUA) (GEF) LSD.

20 +34 ORDERS 737-79L (CFM56-7B24) (1331-33408, 2003-06; 1351-33409, /03 B-5044, 2003-07; 1354-33410, /03 B-5045, 2003-07; 1538-33411, /04 B-2612, 2004-07; 1544-33412, /04 B-2613, 2004-07; 1560-33413, /04 B-2700, 2004-08; 1749-34019, /05 B-5211, 2005-07; 1769-34020, /05 B-5213, 2005-08; 1774-34021, /05 B-5214, 2005-08; 34022, /05 B-5217, 2005-09; 1795-34023, /05 B-5201 WITH SPECIAL 2008 OLYMPICS COLORS "ONE WORLD, ONE DREAM" 2005-10; 1837-34537, /05 B-5202, 2005-12; 1853-34538, /06 B-5203, 2006-01; 1856-34539, /06 B-5220, 2006-01; 1877-34540, /06 B-5226, 2006-02; 1937-34541, /06 B-5227, 2006-05; 1993-34542, /06 B-5228, 2006-07; 2006-34543, /06 B-5229, 2006-07; 41091, /13 B-5296, 2013-01). 127 PAX.

5 737-8Q8 (CFM56-7B26) (2171-29373, B-5311, 2007-02; 2203-29374, B-5312, 2007-03; 1985-30704, B-5172, 2006-07; 2001-30705, B-5173, 2006-07; 2210-30716, B-5313, 2007-03), (ILF) 7 YR LSD.

4 ORDERS 737-800 (CFM56-7B26), 8F, 160Y:

36 ORDERS (2011-02) 737-800 (CFM56-7B26), WITH WINGLETS. 8F, 160Y:

9 ORDERS (2013-02) 737-800 (CFM56-7B) (ALE) 12 YEAR LSD:

5 737-808 (CFM56-7B26) (1887-34701, B-5167, 2006-03; 1917-34702, B-5168, 2006-04; 1941-34703, B-5169, 2006-05; 1998-34705, B-5170, 2006-07; 2014-34706, B-5171, 2006-08), (ICE) LSD. 8F, 160Y.

2 737-85N (CFM56-7B) (2944-36774, B-5455, 2009-06; 2951-36775, B-5457, 2009-07), 36774; FOR SHANDONG AIRLINES (SHG) OPS. 36775; TRANSFERRED FROM (SHG) TO (BEJ).

19 737-86N (CFM56-7B26) (965-28655, /01 B-2161; 2117-32682, B-5178, 2006-11; 2275-32692, B-5325, 2007-05; 2095-34258, B-5176, 2006-11; 2067-35209, B-5175, 2006-10; 2146-35211, B-5179, 2007-01; 2308-35214, B-5326, 2007-06; 2444-35221, B-5328, 2007-11; 2643-35222, B-5329, 2007-12; 2699-36810, B-5196, 2008-08; 2777-36811, B-5197, 2009-01; 2918-36812, B-5431, 2008-06; 2976-36813, B-5436, 2009-07; 3020-36815, B-5437, 2009-09; 3032-36816, B-5438, 2009-09; 3275-36545, B-5508, 2010-05; 36547, B-5509, 2010-06; 36548, B-5516, 2010-06; 3436-37886, B-5525, 2010-10). (GEF) LSD. 35209; IN "BEIJING 2008 OLYMPICS" LIVERY. 8F, 160Y.

54 737-89L (CFM56-7B26) (337-29876, /99 B-2641; 359-29877, /99 B-2642; 379-29878, /99 B-2643; 427-29879, /99 B-2645; 511-29880, /00 B-2648; 572-30159, /00 B-2649; 594-30160, /00 B-2650; 1165-30515, /02 B-2671; 1224-30517, /02 B-2657; 2403-36483, /07 B-5341; 2441-36484, /07 B-5342; 2470-36485, /07 B-5343; 2606-36486, /08 B-5390; 2704-36489, /08; 2759-36491, /08 B-5198; 2828-36492, /09 B-5387; 2845-36741, /09 B-5422 - - SEE PHOTO - - "BEJ-737-89L-2009-03;" 2877-36742, /09 B-5423; 2896-36743, /09 B-5425; 2969-36744, /09 B-5426; 3049-36745, /09 B-5442; 3072-36747, /09 B-5443; 3127-36748, /09 B-5486; 3145-36749, /10 B-5495; 3155-36750, /10 B-5496; 3167-36751, /10 B-5497; 3188-36752, /10 B-5500; 3247-36753, /10 B-5507; 3387-36755, /10 B-5477; 40015, /10 B-5447; 40027, B-5572; 40030, /11 B-5621 - - SEE INCDT REPORT - (2013-03); 40031, /11 B-5622; 40032, /11 B-5570; 40034, /12 B-5679; 40042, B-1958, 2014-08; 40043, B-5755, 2013-06; 41101, B-1760, 2015-01; 41103, B-1762, 2015-03; 41105, B-1764, 2015-05; 41107, B-1526, 2015-07; 41108, B-1766, 2015-03; 41109, B-1767, 2015-01; 43410, B-7180, 2016-01; 43424, B-1417, 2017-02; 44911, B-7182, 2016-01; 44921, B-1529, 2015-09; 44922, B-1530, 2015-09; 60867, B-1418, 2017-05). 40043; TO (SHG) 2013-06. 8F, 160Y.

1 737-89L (CFM56-7B26) (41313, B-5851), (ALC) LSD 2013-12. 8F, 160Y.

60 ORDERS 737NG & 737 MAX:

1 747-2J6C (SCD) (JT9D-7R04G2) (814-24960, /90 B-2462). (CAO) OPS. FREIGHTER.

3 747-2J6F (JT9D-7R4G2) (591-23071, /83 B-2446; 628-23461, /85 B-2448; 670-23746, /87 B-2450). (CAO) OPS. 23461; LST UNI-TOP AIRLINES. FREIGHTER.

0 747-200F, (TLS) WET-LSD 2000-06. (CAO) OPS. RTND.

1 747-4J6 (PW4056) (904-25879, /92 B-2464; 926-25880, /92 B-2466; 957-25881, /93 B-2443; 1021-25882, /94 B-2445; 1054-25883, /95 B-2447; 1243-30158, /00 B-2472). 25879; 25880; ST (TBC), LST (KHZ). 25883 IS STILL USED AS CHINESE PREMIER'S EXECUTIVE TRANSPORT; 18F, 36C, 346Y.

0 747-4J6M (PW4056) (743-23346, /89 B-2456; 775-24347, /90 B-2458; 792-24348, /90 B-2460; 1119-28754, /97 B-2467; 1128-28755, /97 B-2468; 1175-28756, /98 B-2469; 1181-29070, /98 B-2470; 1229-29071, /99 B-2471), 23346; 24347 & LAST 5 TO BE RETIRED BY 2013-06. 10F, 24C, 249Y/PLTS.

1 747-412F (SCD) (PW4056) (1052-26560, B-2409), (SIA) 3 YR LSD 2003-09. (CAO) OPS. FREIGHTER.

2 747-4FTF (PW4056) (1367-34239, B-2475, 2005-12; 1373-34240, B-2476, 2006-04), (CAO) OPS. FREIGHTER.

4 +3 ORDERS 747-89L (GEnx-2B67) (41191, B-2485, 2014-09; 41847, B-2481; 44933, B-2482, 2015-05; B-2486, 2014-11;), 12F, 54C, 66PY, 233Y.

0 757-2ZO (RB211-535E4) (476-25885, /92 B-2820; 480-25886, /92 B-2821; 495-26155, /92 B-2826; 595-27258, /94 B-2836; 624-27367, /94 B-2841; 669-27511, /95 B-2844; 822-29792, /98 B-2855; 833-29793, /98 B-2856), EX-(XIN) 2003-03. (ETOPS) EQ'PD. ALL PHASED OUT BY 2013-12. 27367; CONVERTED TO FREIGHTER & SENT TO AIR CHINA CARGO (CAO). 8C, 192Y.

0 767-2J6ER (JT9D-7R4E4) (126-23307, /85 B-2551; 127-23308, /85 B-2552; 155-23744, /87 B-2553; 156-23745, /87 B-2554), 23745; ST (SFI) 2007-07. 23307; TO (ABX) 2007-09. (ETOPS) EQ'PD. ALL RETIRED END OF MARCH 2012. 18F, 196Y.

0 767-2J6ER (PW4052) (204-24007, /88 B-2555; 253-24157, /89 B-2556), (ETOPS) EQ'PD. 24007; 24157; RETIRED END OF MARCH 2012. 18F, 196Y.

2 767-3J6 (PW4056) (429-25875, /92 B-2557; 478-25876, /93 B-2558; 530-25877, /94 B-2559; 569-25878, /95 B-2560). 25875; 25876; RETIRED END OF MARCH 2012. 10F, 26C, 189Y.

0 767-3Q8ER (PW4060) (692-28132, /03 B-2493; 762-30301, /03 B-2496), EX-(TWA)/(AAL), (ILF) 5 YR LSD. 30302; RTND, LST (GMG) 2010-03.

0 767-33AER (PW4056) (591-27909, 2004-06); 780-27477, /95 B-2497 2004-08; EX-(VIE), (AWW) LSD. 27477; & 27909; RTND , LST (VAR) 2007-10. ALL RETIRED END OF MARCH 2012. 21C; 196Y.

1 767-332ER (CF6-80C2B6F) (797-30597, /00 B-2499), 30C, 203Y.

4 777-2J6 (PW4084) (168-29153, /98 B-2059*; 173-29154, /98 B-2060** - - SEE PHOTO - - "BEJ-777-2J6-2009-04;" 179-19155, /98 B-2061; 214-29156, /99 B-2063; 240-29157, /99 B-2064). *"BLUE PHOENIX LINER" WFU 2016-08; **RED PHOENIX LINER." 49C, 296Y.

5 777-2J6 (PW4084) (280-29744, /00 B-2065; 290-29745, /00 B-2066; 338-29746, /01 B-2067; 344-29747, /01 B-2068; 349-29748, /01 B-2069). 12F, 49C, 253Y.

6 ORDERS (2016-06) 777-300ER (GE90-115B), 8F, 42C, 261Y:

20 777-39LER (GE90-115B) (943-38666, /11 B-2085; 954-36672, /11 B-2087; 966-38667, /11 B-2086 "DREAM CHASER;" 990-38675, /12 B-2089; 1009-38669, /12 B-2090; 1017-38670, /12 B-2031; 1032-38671, /12 B-2032*; 1045-38673, /12 B-2033; 1051-38674, /12 B-2035**; 1066-38676, /12 B-2036; 1085-38678 /13 B-2038; 38679, /13 B-2039; 1123-38680, /13 B-2040; 60374, /14 B-2047; B-2006, 2014-09), *IN STAR ALLIANCE (SAL) COLORS." **IN "SMILING CHINA" COLORS. 8F, 42C, 261Y.

8 ORDERS 777F FOR AIR CHINA CARGO (CAO) OPS. FREIGHTER.

2 +13 ORDERS 787-900 DREAMLINER (TRENT 1000) (34305, /17 B-7877, 2017-01; 34309, /16 B-7832, 2016-08; 34312, /17 B-1591, 2017-02), EX-(N8291V) (CHARLESTON S C #136 & #162), 3 CLASS, 223 PAX.

20 A319-115 (CFM56-5B7) (2237, /04 B-6034; 2269, /04 B-6035; 2285, /04 B-6036; 2293, /04 B-6037; 2298, /04 B-6038; 2499, /05 B-2364; 2508, /05 B-6004; 2525, /05 B-6014; 2532, /05 B-6044, 2545, /05 B-6046; 2551, /05 B-6047; 2805, /06 B-6223; 2819, /06 B-6225; 2839, /06 B-6226; 2847, /06 B-6227; 2890, /06 B-6228; 3195, /07 B-6235 "GABRIEL;" 3200, /07 B-6236; 6514, B-6468, 2015-03; 6603, B-6478, 2015-07). 8F, 120Y.

9 A319-131 (V2522-A5) (2000, /03 B-6022; 2007, /03 B-6023; 2015, /03 B-6024; 2172, /04; 2202, /04 B-6032; 2205, /04 B-6033; 2269, B-6035 2004-08), WET-LST (ZHE) 2003-07. 8F, 120Y.

3 A319-131 (V2522-A5) (2559, /05 B-6048; 2614, /05 B-6213; 2643, /05 B-6216), 8F, 120Y.

3 A319-131 (V2522-A5) (3195, /07 B-6235; 3200, /07 B-6236; 3226, /07 B-6237; 3250, /07 B-6238), 8F, 120Y.

13 ORDERS A319/A320/A321 (V2500):

1 A320-200 (CGP) LSD 2006-05.

6 A320-214 (CFM56-5B7) (0876, /98 B-2376; 0921, /98 B-2377; 1296, /OO B-2210; 3337, B-6606; 3461, B-6607; 3601, B-6608), (GEF) LSD. 8C, 150Y.

1 A320-214 (V2500) (4900, B-6822), EX-(D-AVVI) 2011-10. 8C, 150Y.

3 A320-214 (V2500) (4985, B-6846, 2012-01; 5014, B-6915, 2012-07; 5568, B-9918), EX-(F-WWIL & F-WWTO), & EX-(B-507L) 2013-07. 8C, 150Y.

2 A320-214 (V2500) (5771, B-9926; 6466, B-1686, 2015-05), EX-(B-509L & B-506L), 8C, 150Y.

2 A320-216 (4070, 9M-AHU, 2009-10; 4079, 9M-AHV, 2009-10).

4 A320-232 (4220, B-6676, 2010-06; 4348, B-6677, 2010-06; 4566, B-6733, 2011-04; 4593/TJ50, B-6745; 7134, B-8491, 2016-08).

4 ORDERS (2013-02) A321-200, (ALE) 12 YR LSD:

2 A321-211 (3307, B-6327, 2007-12; 3329, B-6326, 2007-12).

11 A321-213 (3523, B-6361, 2008-05; 3623, B-6362, 2008-08; 3725, B-6386, 2008-12; 3766, B-6555, 2009-01; 3806, B-6556, 2009-02; 3940, B-6599, 2009-06; 3973, B-6593, 2009-07; 4022, B-6595, 2009-09; 4031, B-6596, 2009-09; 4062, B-6597, 2009-10; 4131, B-6603, 2009-12).

6 A321-213 (4091, B-6605, 2009-11; 4108, B-6631, 2010-02; 4283, B-6633, 2010-04; 4318, B-6655, 2010-05; 4472, B-6701, 2010-10; 4494, B-6711, 2010-10).

4 A321-232 (4873, B-6823, 2011-10; 5435, B-6961, 2013-01; 7511, B-8799, 2017-01; 7557, B-8800, 2017-02), EX-(D-AVZA), (D-AVZW) & (D-AVZR).

1 A321-232 (6159, B-1833), (ALE) LSD 2014-06.

19 ORDERS A330 (TRENT 700):

21 A330-243 (TRENT 772C-60) (750, /06 B-6070 (SEE PHOTO); 756, /06 B-6071; 759, /06 B-6072; 780, /06 B-6073; 785, /06 B-6075 "ZIJIN HAO" (FORBIDDEN PAVILION LINER); 797, B-6076 "ZICHEN HAO" (CAPITAL PAVILION LINER) 2006-12; 802; 810, /07 B-6079; 815, /07 B-6080; 839, /07 B-6081; 860, /07 B-6090; 867, /07 B-6091; 873, /07 B-6091; 873, /07 B-5092; 884, /07 B-6093; 890, /08 B-6113; 903, /08 B-6117; 909, /08 B-6115; 944, /08 B-6132; 1260, /11 B-6536; 1282, /12, B-6540; 1330, B-6549; 1471, /13 B-5933), (ETOPS) APPROVED. 12C, 271Y.

1 A330-300, 232 TONNES (MTOW), 2015-09. 30C, 16PY, 255Y.

12 ORDERS A330-300:

1 A330-343 (TRENT 772C-60) (1130, /10 B-6513), (DEA) LSD 2010-06. EX-(F-WWKN), 12C, 271Y.

3 A330-343E (TRENT 772C-60) (1187, /10 B-6523; 1216, /11 B-6530; 1538, B-5947, 2014-06), 12C, 271Y.

1 A330-343 (TRENT 772C-60) (1658, B-5877), EX-(F-WWYC) 2015-09. 12C, 271Y.

3 A340-313X (CFM56-5C4) (192, /97 B-2385; 199, /97 B-2386; 201, /97 B-2387), 2 YR LST (CAT) 1999-10. RF (CAT) 2001-08, WILL GO TO (XIN). 201, B-2387 RTND 2001-10. 12F, 24C, 255Y.

3 A340-313X (242, /03 B-2388; 243, /04 B-2389; 264, /04 B-2390). 12F, 24C, 255Y.

1 A340-343 (1110, B-6511), (DEA) LSD 2010-05.

6 ORDERS A380:

0 L-100-30, 2 RETIRED.

0 B AE 146-100 (ALF502R-5) (E1076, /87 B-2707; E1081, /87 B-2708; E1083, /87 B-2709), LST (IML). 2707; 2708; ST AVTRADE 2003-05. 82Y.

1 AN-24.

3 AN-24RV.

20 ORDERS COMAC (CCC) C919 (LEAP-X):

0 TU-204-120C (RB211-535E4-B), EX-(XIN). 3 RTND. FREIGHTER.

0 Y-7-100 (MJ5A-1) 2 RTND.

Management:
(definitions)

Click below for photos:
BEJ-1-MADAME YINXIANG WANG-2014-06
BEJ-1-MADAME YINXIANG WANG-2014-06-A
BEJ-1-Wang Yinxiang - Ctr-2015-12.jpg
BEJ-2-Song Zhiyong - 2016-02.jpg
BEJ-2-SONG ZHIYONG AND CHRIS LUXON-2014-11
BEJ-3-CAI JIANJIANG - 2014-01
BEJ-4-KARL ULRICH GARNADT - 2014-08
BEJ-7-Dr Zhihang Chi-2R - 2015-10.jpg

MS YINXIANG WANG, CHAIRWOMAN OF AIR CHINA (BEJ).

SONG ZHIYONG, PRESIDENT AIR CHINA (BEJ) (2016-02).
Song, 49 years old, started his career in China's civil aviation industry in 1987. He has served as Deputy General Manager and a Member of the Communist Party Committee of China National Aviation Holding Company since December 2010. Before that, he was Vice President, a Member of the Communist Party Committee, and a Member of the Standing Committee of the Communist Party Committee of the Company from October 2006 to December 2010.

Since Cai Jiangjiang no longer serves as President of Air China, he will serve as a non-executive director of the Company instead of an executive director, the flag carrier said in the announcement.

The Board expressed its sincere gratitude to Cai for his significant contribution to the development of the Company during his tenure of office.

Cai replaced Wang Changshun, who has been appointed as Deputy Minister of China's Transport Ministry, to become General Manager of China National Aviation Holding Company.

CAI JIANJIANG, WAS CHAIRMAN & GENERAL MANAGER (2014-01), NOW STEPPED DOWN TO BECOME GENERAL MANAGER OF PARENT, CHINA NATIONAL AVIATION HOLDING COMPANY (2016-02).
Air China (BEJ) parent, China National Aviation Holding Company (CNAH) on January 29th, 2016 named Cai Jianjiang as new General Manager.

Cai, was previously Air China (BEJ) President, having succeeded Wang Changshun, who was appointed as Vice Minister, Ministry of Transport of China.

Cai joined Air China (BEJ) in 2001. He has been President and Executive Director of Air China (BEJ) since 2007. Before that, Cai served as Vice President of Air China from September 2004 to February 2007. He was Chairman of Shenzhen Airlines (SHZ) in April 2010. He also used to be General Manager of Shanghai Branch, Assistant President, and Manager of the Marketing Department in Air China (BEJ). He graduated from a college that later became the Civil Aviation University of China.

Cai is a low-key person but good at management. In his tenure as Air China (BEJ) President, the flag carrier has been the most profitable airline in the country.

CHENG FAN, CHIEF FINANCIAL OFFICER (CFO) & VP. ALSO GENERAL SECRETARY OF PARTY COMMITTEE.

ZHISHAN XU, MANAGING DIRECTOR GROUND HANDLING.

LOU YONGFENG, MANAGING DIRECTOR INTERNATIONAL AFFAIRS & COOPERATION.

HUANG BIN, BOARD SECRETARY.

CAPTAIN YINGNIAN WANG, CHIEF PILOT.

CAPTAIN YIRU CHENG, VP FLIGHT OPERATIONS.

CAPTAIN GAO DIAN BANG, CHIEF PILOT, CHINA NATIONAL AVIATION HOLDING CO (2002-10).

JINLIN LI, PRESIDENT AIR CHINA CARGO.

XIAO FENG, CHIEF ACCOUNTANT.

ZHANG XUE REN, VP & GENERAL MANAGER, AIR CHINA CARGO COMPANY.

DR ZHIHANG CHI, VP & GENERAL MANAGER AMERICAS (USA /CANADA).

ZHOU ENYONG, GENERAL MANAGER NETWORK SALES DEPARTMENT.

KUILIANG MA, VP MAINTENANCE, (AMECO) & AVIATION EQUIPMENT COMPANY (2002-10).

JIANGYIANG CAI, VP MARKETING & FINANCE.

LIHUA YANG, VP SERVICES.

YUDE SUN, VP STRATEGIC PLANNING.

YANG LIHUA, VP.

WANG MINGYUAN, VP.

CHENG JING LIN, DIRECTOR FLIGHT OPERATIONS.

XU CHUAN YU, 737 FLEET CAPTAIN.

XING LIAN BIN, 747-200 FLEET CAPTAIN.

HUANG XI LIN, 747-400 FLEET CAPTAIN.

WU ZHANG LIN, 767 FLEET CAPTAIN.

WANG HU JUN, 777 FLEET CAPTAIN.

WANG ZHAO, DIRECTOR FLIGHT OPERATIONS SAFETY.

WANG YONGSHENG, PUBLIC RELATIONS (PR) DIRECTOR.

YAN SHI AN, VP ENGINEERING & MAINTENANCE ADVISOR.

MS FENG RUN'E, VICE PRESIDENT.

WANG SHENG PING, DEPUTY CHIEF ENGINEER (2000-05).

BAI ZHI JIAN, GENERAL MANAGER (CASC) (1999-01).

CHAI WEI XI, GENERAL MANAGER ENGINEERING & MAINTENANCE (2001-12).

PAN LEI, DIRECTOR ENGINEERING (2000-05) & DEPUTY GENERAL MANAGER (2001-12).

QIU DENG CHANG, DEPUTY DIRECTOR RELIABILITY.

CUI QINGYUN, DEPUTY DIRECTOR ENGINEERING (1999-05).

WANG XUE ZHOU, DEPUTY DIRECTOR ENGINEERING & MAINTENANCE (OUTSTATIONS).

MS ZHANG LAN, DIRECTOR COMMERCIAL.

GAO FU MIN, DIRECTOR QUALITY ASSURANCE (QA) (1999-01).

HU PENGBIN, DEPUTY DIRECTOR PLANNING & DEVELOPMENT DEPARTMENT.

CHEN HENG BAO, ADVISOR AEROTECH EQUIPMENT (1999-01).

JACK (XIAOMING) LIU, GENERAL MANAGER CANADIAN OPERATIONS, BASED IN VANCOUVER B C, CANADA.
Jack previously was General Manager Thailand Operations, where he managed Bangkok, Chiang Mai and Phuket operations since 2011. He has 20 years experience serving in various senior management positions in China and San Francisco, USA. He joined Air China in 1996.

LUO YONG, GENERAL MANAGER JAPAN.

RUI JIE, GENERAL MANAGER AUSTRALIA.

WEI YONG SHU, MANAGER ENGINEERING & MAINTENANCE.

ZHANG ZHEN JIE, MANAGER PLANNING.

WANG ZHI SHENG, DEPUTY MANAGER MAINTENANCE PLANNING (1999-01).

ZHANG HUA, MANAGER OUTSTATIONS.

GE SHENG HAI, PRESIDENT (AIE) (1999-01).


Aircraft Maintenance & Engineering Corporation (AMECO) personnel:

SONG ZHIYONG, CHAIRMAN AMECO BEIJING (2014-03).
Song Zhiyong succeeded Cai Jianjiang.

KARL ULRICH GARNADT, VICE CHAIRMAN AMECO BEIJING (2014-08).
Karl Ulrich Garnadt was born on 1957. He began his career at Lufthansa (DLH) in 1979. In 2011, he became (CEO) and Chairman of Lufthansa Cargo AG (LUB). Since May 1, 2014, he has been a Member of the Executive Board of Deutsche Lufthansa AG and (CEO) of Lufthansa German Airlines (DLH).

NI JILIANG, GENERAL MANAGER (AMECO) (2014-12).

DR ANDREAS HEIZNER, GENERAL MANAGER & (CEO) (AMECO).

CHAI WEIXI, CHIEF EXECUTIVE OFFICER (CEO) (AMECO) (2015-06)

WALTER HEERDT, GENERAL MANAGER (AMECO) (2000-04).

LIAO LINGHONG, EXECUTIVE DIRECTOR OPERATION DIVISION (AMECO), EX-AIR CHINA (BEJ) TECHNICS. (2012-07).

LIU CHUNXI, EXECUTIVE DIRECTOR SAFETY & MANAGEMENT DIVISION (AMECO), EX-DEPUTY GENERAL MANAGER DALIAN AIRLINES (2012-07).

ZHENG YAN, EXECUTIVE DIRECTOR SUPPORT/MARKETING DIVISION (AMECO) (2002-02).

HARRY SEEGER, EXECUTIVE DIRECTOR PRODUCT SUPPORT & MARKETING (AMECO)(2000-07).

DING XUE QI, DIRECTOR AIRCRAFT MAINTENANCE & OVERHAUL DIVISION (AMECO) (2000-06).

WANG QIAN, DIRECTOR AIRCRAFT MAINTENANCE (AMECO) (1997-03).

RUDOLF BENK, DIRECTOR AIRCRAFT MAINTENANCE & OVERHAUL, (AMECO) (2000-01).

H BLOCKER, DIRECTOR REPAIR SHOP & FACILITY (AMECO) (1999-01).

WANG YONGSHENG, PUBLICATIONS RELATIONS DIRECTOR (AMECO).

EDERHERD KOHL, AIRCRAFT MAINTENANCE MANAGER (AMECO) (1998-06).

ZHANG XIANG HE, MANAGER AIRCRAFT MAINTENANCE (AMECO) (1997-08).

F FUELLER, MANAGER ENGINEERING (AMECO).

WU XUE LIANG, MANAGER ENGINEERING (AMECO) (1999-01).

ZHANG ZHIPING, MANAGER PRODUCTION PLANNING & CONTROL (AMECO).

NI JILIANG, MANAGER ENGINE SERVICES, (AMECO) (2001-04).

O FUCHSLOCHER, CHIEF INSPECTOR, (QC) (AMECO).

GAO LI ZHU, CHIEF INSPECTOR QUALITY CONTROL (QC) (AMECO) (1997-08).

SONG ZHI JIE, PROJECT MANAGER (AMECO).

SUN FU CHENG, MANAGER MAINTENANCE PROGRAM PLANNING (AMECO).

LU YONG, MANAGER RELIABILITY (AMECO).

GAO FU MIN, MANAGER QUALITY ASSURANCE (QA) (AMECO).

 
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