09:49     CNAC<01110> - Announcement (3)                                      

    commercial terms which are determined on an arm's                         
    length basis and are fair and reasonable so far as                        
    the Company and its shareholders are concerned.                           
                                                                              
    REASONS FOR THE DELAY IN DISCLOSURE                                       
    The Directors explain that the delay in disclosing                        
    details of the Tenancy Agreement is due to a                              
    miscalculation of the relevant percentage ratios (as                      
    defined in the Listing Rules) by the Company when the                     
    Tenancy Agreement was entered into by Air Macau. The                      
    Company only discovered that the Tenancy Agreement                        
    constitutes a continuing connected transaction that                       
    is subject to the reporting and announcement                              
    requirements when the management of the Company                           
    carried out their administrative review on annual                         
    operations and recalculate the relevant percentage                        
    ratios in March 2005. Accordingly, the delay of                           
    disclosure is directly due to an oversight by the                         
    Company and the Board and such delay could be avoided                     
    in the future by means of the management of the Company                   
    exercising better scrutiny over the calculation of                        
    the relevant percentage ratios and by ensuring that                       
    relevant professional advisers be consulted whenever                      
    there is a transaction, the nature and the size of                        
    which may constitute it a notifiable transaction                          
    under Chapter 14 or 14A of the Listing Rules.                             
                                                                              
    BUSINESS OF THE GROUP                                                     
    The Group is principally engaged in the provision of                      
    air transportation services through Dragonair and Air                     
    Macau, airport ground handling services and logistics                     
    services. For the two years ended 31 December, 2002                       
    and 2003, the Group recorded an audited profit                            
    attributable to shareholders of the Company of                            
    approximately HK$317,417,000 and an audited loss                          
    attributable to shareholders of the Company of                            
    approximately HK$18,747,000 respectively. The                             
    audited net asset value of the Group as at 31 December,                   
    2003 was approximately HK$2,642,331,000.                                  
                                                                              
    INFORMATION ON THE LANDLORDS                                              
    The Landlords are investment holding companies and                        
    their sole asset is the Premises.                                         
                                                                              
    GENERAL                                                                   
    The Company's failure to issue a public announcement                      
    concerning the continuing connected transaction has                       
    constituted a breach of Rule 14A.34 of the Listing                        
    Rules. The transaction contemplated under the Tenancy                     
    Agreement will be subject to the annual review                            
    requirement and the reporting requirement under Rules                     
    14A.37 to 14A.41 and Rules 14A.45 and 14A.46 of the                       
    Listing Rules.                                                            
                                                                              
    The Stock Exchange has indicated to the Company that                      
    it reserves the rights to take appropriate action                         
    against the Company and the Directors in respect of                       
    such breach of the Listing Rules.                                         
                                                                              
    DEFINITIONS                                                               
    "Air China"     Air China Limited, a joint stock limited                  
    company incorporated under the laws of the PRC with                       
    limited liability, whose H shares are listed on the                       
    Stock Exchange                                                            
                                                                              
    "Air Macau"     Air Macau Company Limited, a company                      
    incorporated under the laws of Macau with limited                         
    liability and a 51% indirectly owned subsidiary of                        
    the Company                                                               
                                                                              
    "Board" the board of Directors                                            
                                                                              
    "Building"      398 Alameda Dr. Carlos D'Assumpcao,