Unassociated Document

Notes to the Consolidated Financial Statements

(Prepared in accordance with International Financial Reporting Standards)

(Expressed in Renminbi)

1	Basis of presentation

China Southern Airlines Company Limited (the “Company”) and its subsidiaries (the “Group”) are principally engaged in the provision of domestic, Hong Kong and Macau and international passenger, cargo and mail airline services.

The Company was established in the People’s Republic of China (the “PRC” or “China”) on March 25, 1995 as a joint stock limited company as part of the reorganisation (the “Reorganisation”) of the Company’s holding company, China Southern Air Holding Company (“CSAHC”). CSAHC is a state-owned enterprise under the supervision of the PRC central government.

The Company’s H Shares and American Depositary Receipts (“ADR”) (each ADR representing 50 H Shares) have been listed on the Stock Exchange of Hong Kong Limited and the New York Stock Exchange, respectively since July 1997. In July 2003, the Company issued 1,000,000,000 A Shares which are listed on the Shanghai Stock Exchange.

2	Principal accounting policies

(a)

Statement of compliance

These consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“IASs”) and interpretations issued by the International Accounting Standards Board (the “IASB”).

The IASB has issued certain new and revised IFRSs and interpretations that are first effective or available for early adoption for the current accounting period of the Group. There have been no significant changes to the accounting policies applied in these consolidated financial statements for the years presented as a result of these developments. A summary of the principal accounting policies adopted by the Group is set out below.

However, as a result of the adoption of IFRS 7, Financial instruments: Disclosures and the amendment to IAS 1, Presentation of financial statements: Capital disclosures, there have been some additional disclosures provided as follows:

As a result of the adoption of IFRS 7, the consolidated financial statements include expanded disclosure about the significance of the Group’s financial instruments and the nature and extent of risks arising from those instruments, compared with the information previously required to be disclosed by IAS 32, Financial instruments: Disclosure and presentation. These disclosures are provided throughout these consolidated financial statements, in particular in note 43.

The amendment to IAS 1 introduces additional disclosure requirements to provide information about the level of capital and the Group’s objectives, policies and processes for managing capital. These new disclosures are set out in note 37.

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2	Principal accounting policies (continued)

(a)

Statement of compliance (continued)

Both IFRS 7 and the amendment to IAS 1 do not have any material impact on the classification, recognition and measurement of the amounts recognised in the consolidated financial statements.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see Note 50).

(b)

Basis of preparation of the consolidated financial statements

At December 31, 2007, the Group’s current liabilities exceeded its current assets by RMB33,811 million, which includes bank and other loans repayable within one year of RMB24,948 million. In preparing the consolidated financial statements, the directors have considered the Group’s sources of liquidity and believe that adequate funding is available to fulfil the Group’s short-term obligations and capital expenditure requirements. Accordingly, the consolidated financial statements have been prepared on a basis that the Group will be able to continue as a going concern. Further details are set out in Note 43(a).

The consolidated financial statements for the year ended December 31, 2007 comprise the Company and its subsidiaries and the Group’s interest in associates and jointly controlled entities.

The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis except that the following assets and liabilities are stated at their fair value as explained in the accounting policies set out below:

- Certain property, plant and equipment (Note 2(h));

- Certain assets held under finance leases (Note 2(j));

- Derivative financial instruments (Note 2(g)); and

- Available-for-sale securities (Note 2(f)).

The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on the consolidated financial statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 48.

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2	Principal accounting policies (continued)

(c)

Subsidiaries and minority interests

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Minority interests are presented in the consolidated balance sheet within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated statements of operations as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

Loans from holders of minority interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated balance sheet in accordance with Notes 2(o) or (p) depending on the nature of the liability.

(d)

Associates and jointly controlled entities

An associate is an entity in which the Group or the Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policies.

A jointly controlled entity is an entity which operates under a contractual arrangement between the Group or the Company and other parties, where the contractual arrangement establishes that the Group or Company and one or more of the other parties share joint control over the economic activities of the entity.

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2	Principal accounting policies (continued)

(d)

Associates and jointly controlled entities (continued)

An investment in an associate or a jointly controlled entity is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the associate’s or the jointly controlled entity’s net assets. The consolidated statements of operations includes the Group’s share of the post-acquisition, post-tax results of the associates and jointly controlled entities for the year, including any impairment loss on goodwill relating to the investment in associates and jointly controlled entities recognised for the year (Notes 2(e) and (l)).

When the Group’s share of losses exceeds its interest in the associate or the jointly controlled entity, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or the jointly controlled entity. For this purpose, the Group’s interest in the associate or the jointly controlled entity is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the jointly controlled entity.

Unrealised profits and losses arising from transactions between the Group and its associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the associate or jointly controlled entity, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

(e)

Goodwill

Goodwill represents the excess of the cost of a business combination or an investment in an associate or a jointly controlled entity over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (Note 2(l)). In respect of associates or jointly controlled entities, the carrying amount of goodwill is included in the carrying amount of the interest in the associate or jointly controlled entity.

Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of a business combination or an investment in an associate or a jointly controlled entity is recognised immediately in profit or loss.

On disposal of a cash-generating unit, an associate or a jointly controlled entity during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

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2	Principal accounting policies (continued)

(f)

Other investments in equity securities

The Group’s policies for investments in equity securities, other than investments in subsidiaries, associates and jointly controlled entities, are as follows:

Investments in equity securities are initially stated at cost, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Cost includes attributable transaction costs, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

Available-for-sale securities are those non-derivative financial assets that are designated as available for sale. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised directly in equity, except foreign exchange gains and losses resulting from changes in the amortised cost of monetary items which are recognised directly in profit or loss. Dividend income from these investments is recognised in accordance with the policy set out in Note 2 (v)(iii). When these investments are derecognised or impaired (Note 2(l)), the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss.

The Group’s other investments in equity securities represent unlisted equity securities of companies established in the PRC. They do not have a quoted market price in an active market and whose fair value cannot be reliably measured. Accordingly, they are recognised in the consolidated balance sheet at cost less impairment losses (Note 2(1)).

Investments are recognised / derecognised on the date the Group commits to purchase / sell the investments or they expire.

(g)

Derivative financial instruments

Derivative financial instruments are recognised at fair value. At each balance sheet date the fair value is remeasured. The gain or loss on remeasurement to fair value is charged immediately to profit or loss.

(h)

Property, plant and equipment

(i)	Investment property

Investment properties are land and/or buildings which are owned or held under a leasehold interest (Note 2(j)) to earn rental income and/or for capital appreciation.

Investment properties are stated in the consolidated balance sheet at cost, less accumulated depreciation and impairment losses (Note 2(l)). Depreciation is calculated to write off the cost of items of investment property, less their estimated residual value, if any, using the straight line method over their estimated useful lives. Rental income from investment properties is accounted for as described in Note 2(v)(ii).

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2	Principal accounting policies (continued)

(h)

Property, plant and equipment (continued)

(ii)	Other property, plant and equipment

Items of property, plant and equipment are initially stated at cost, less accumulated depreciation and impairment losses (Note 2(l)). The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to working condition and location for its intended use and the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located.

Subsequent to the revaluation of the Group’s property, plant and equipment as at December 31, 1996 (Note 17(b)), which was based on depreciated replacement costs, certain of the Group’s property, plant and equipment are carried at revalued amount, being the fair value at the date of the revaluation less any subsequent accumulated depreciation.

Revaluations are performed with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair value at the balance sheet date.

Changes arising on the revaluation of property, plant and equipment are generally dealt with in reserves. The only exceptions are as follows:

When a deficit arises on revaluation, it will be charged to profit or loss to the extent that it exceeds the amount held in the reserve in respect of that same asset immediately prior to the revaluation; and

When a surplus arises on revaluation, it will be credited to profit or loss to the extent that a deficit on revaluation in respect of that same asset had previously been charged to profit or loss.

The cost of self-constructed items of property, plant and equipment includes the cost of materials, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (Note 2(y)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal. Any related revaluation surplus is transferred from the revaluation reserve to retained profits.

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2	Principal accounting policies (continued)

(h)

Property, plant and equipment (continued)

(ii)	Other property, plant and equipment (continued)

Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Buildings	30 to 35 years
Owned and leased aircraft	15 to 20 years
Other flight equipment
- Jet engines	15 to 20 years
- Others, including rotable spares	2.5 to 15 years
Machinery and equipment	4 to 10 years
Vehicles	6 to 8 years

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(i)

Construction in progress

Construction in progress represents office buildings, various infrastructure projects under construction and equipment pending installation, and is stated at cost less impairment losses (Note 2(l)). Capitalisation of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use, notwithstanding any delay in the issue of the relevant commissioning certificates by the relevant PRC authorities.

No depreciation is provided in respect of construction in progress.

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2	Principal accounting policies (continued)

(j)

Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i)

Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except for land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii)

Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 2(h). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 2(l). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

(iii)

Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made.

The cost of acquiring land held under operating lease is amortised on a straight-line basis over the respective periods of lease terms which ranged from 30 to 70 years.

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2	Principal accounting policies (continued)

(j)

Leased assets (continued)

(iv)

Sale and leaseback transactions

Gains or losses on sale and leaseback transactions which result in finance leases are deferred and amortised over the terms of the related leases. Gains or losses on other aircraft sale and leaseback transactions which result in operating leases are recognised immediately if the transactions are established at fair value. Any difference between the sales price and the fair value is deferred and amortised over the period the assets are expected to be used.

(k)

Deferred expenditure

Lump sum housing benefits payable to employees of the Group are deferred and amortised on a straight-line basis over a period of 10 years, which represents the benefit vesting period of the employees.

Deferred expenditure is stated at cost less impairment losses (Note 2(l)).

(l)

Impairment of assets

(i)	Impairment of investments in equity securities and other receivables

Investments in equity securities (other than investments in subsidiaries, associates and jointly controlled entities: Notes 2(c) and 2(d)) and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale equity securities are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

significant financial difficulty of the debtor;

a breach of contract, such as a default or delinquency in interest or principal payments;

it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

a significant or prolonged declined in the fair value of an investment in an equity instrument below its cost.

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2	Principal accounting policies (continued)

(l)

Impairment of assets (continued)

(i)	Impairment of investments in equity securities and other receivables (continued)

If any such evidence exists, any impairment loss is determined and recognised as follows:

For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed.

For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

For available-for-sale securities, the cumulative loss that has been recognised directly in equity is removed from equity and is recognised in profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised directly in equity.

Impairment losses are written off against the corresponding asset directly, except for impairment losses recognised in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

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2	Principal accounting policies (continued)

(l)

Impairment of assets (continued)

(ii)	Impairment of other assets

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

Property, plant and equipment carried at cost less accumulated depreciation;

- Construction in progress;

- Lease deposits;

- Lease prepayments;

- Deferred expenditure;

Investments in associates and jointly controlled entities; and

Goodwill.

If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro-rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

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2	Principal accounting policies (continued)

(l)

Impairment of assets (continued)

(ii)	Impairment of other assets (continued)

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(iii)

Interim financial reporting and impairment

Impairment losses recognised in an interim period in respect of goodwill, available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates.

(m)

Inventories

Inventories, which consist primarily of expendable spare parts and supplies, are stated at cost less any applicable provision for obsolescence, and are charged to profit or loss when used in operations. Cost represents the average unit cost.

Inventories held for disposal are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(n)

Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of bad and doubtful debts (Note 2(l)), except where the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of bad and doubtful debts.

(o)

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

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2	Principal accounting policies (continued)

(p)

Trade and other payables

Trade and other payables are initially recognised at fair value and are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(q)

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

(r)

Financial guarantees issued, provisions and contingent liabilities

(i)	Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with Note 2(r)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

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2	Principal accounting policies (continued)

(r)

Financial guarantees issued, provisions and contingent liabilities (continued)

(ii)	Provision and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligations and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(s)

Defeasance of long-term liabilities

Where long-term liabilities have been defeased by the placement of security deposits, those liabilities and deposits (and income and charge arising therefrom) are netted off in order to reflect the overall commercial effect of the arrangements. Such netting off has been effected where a right is held by the Group to insist on net settlement of the liability and deposit including in all situations of default and where that right is assured beyond doubt.

(t)

Deferred credits

In connection with the acquisitions or operating leases of certain aircraft and engines, the Group receives various credits. Such credits are deferred until the aircraft and engines are delivered, at which time they are either applied as a reduction of the cost of acquiring the aircraft and engines, resulting in a reduction of future depreciation, or amortised as a reduction of rental expense for aircraft and engines under operating leases.

(u)

Income tax

Income tax for the year comprises current and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

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2	Principal accounting policies (continued)

(u)

Income tax (continued)

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exception to the recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

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2	Principal accounting policies (continued)

(u)

Income tax (continued)

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

the same taxable entity; or

different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

(v)

Revenue recognition

Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i)

Passenger, cargo and mail revenues are recognised when the transportation is provided. Ticket sales for transportation not yet provided are included in current liabilities as sales in advance of carriage. Revenues from airline-related business are recognised when services are rendered. Revenue is stated net of sales tax.

(ii)

Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivables.

(iii)

Dividend income is recognised when the shareholder’s right to receive payment is established.

(iv)

Government grants are recognised in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted in arriving at the carrying amount of the asset and consequently are recognised in profit or loss over the useful life of the asset.

(v)

Interest income is recognised as it accrues using the effective interest method.

F-25

2	Principal accounting policies (continued)

(w)

Traffic commissions

Traffic commissions are expensed in profit or loss when the transportation is provided and the related revenue is recognised. Traffic commissions for transportation not yet provided are recorded on the consolidated balance sheet as a prepaid expense.

(x)

Maintenance and overhaul costs

Routine maintenance, repairs and overhauls are charged to profit or loss as and when incurred.

In respect of owned and finance leased aircraft, components within the aircraft subject to replacement during major overhauls are depreciated over the average expected life between major overhauls. When each major overhaul is performed, its cost is recognised in the carrying amount of property, plant and equipment and is depreciated over the estimated period between major overhauls. Any remaining carrying amount of cost of previous major overhaul is derecognised and charged to profit or loss.

In respect of aircraft held under operating leases, the Group has responsibility to fulfil certain return conditions under relevant lease agreements. In order to fulfil these return conditions, major overhauls are required to be conducted on a regular basis. Accordingly, estimated costs of major overhauls are accrued and charged to profit or loss over the estimated period between overhauls. After the aircraft has completed its last overhaul cycle prior to being returned, expected cost of overhaul to be incurred at the end of the lease is estimated and accrued over the remaining period of the lease. Differences between the estimated costs and the actual costs of overhauls are charged to profit or loss in the period when the overhaul is performed.

(y)

Borrowing costs

Borrowing costs are expensed in profit or loss in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition or construction of an asset which necessarily takes a substantial period of time to get ready for its intended use.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are interrupted or complete.

(z)

Short term employee benefits and contributions to defined contribution retirement schemes

Salaries, annual bonuses and contributions to defined contribution retirement schemes are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

F-26

2	Principal accounting policies (continued)

(aa)

Termination benefits

Termination benefits are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(bb)

Frequent flyer award programmes

The Group maintains two frequent flyer award programmes, namely, the China Southern Airlines Sky Pearl Club and the Egret Mileage Plus, which provide travel awards to members based on accumulated mileage. The estimated incremental cost to provide free travel is recognised as an expense and accrued as a current liability as members accumulate mileage. As members redeem awards or their entitlements expire, the incremental cost liability is reduced accordingly to reflect the acquittal of the outstanding obligations.

Revenue from mileage sales to third parties under the frequent flyer award programmes is recognised when the related transportation services are provided.

(cc)

Translation of foreign currencies

Foreign currencies transactions during the year are translated into Renminbi at the applicable rates of exchange quoted by the People’s Bank of China (“PBOC”) prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at the PBOC exchange rates prevailing on the balance sheet date. Exchange gains and losses are recognised in non-operating income/(expenses) in the consolidated statements of operations.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into Renminbi at the PBOC exchange rates prevailing on the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into Renminbi at the PBOC exchange rates prevailing on the dates the fair value was determined.

F-27

2	Principal accounting policies (continued)

(dd)

Related parties

For the purposes of these consolidated financial statements, a party is considered to be related to the Group if:

(i)

the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;

(ii)

the Group and the party are subject to common control;

(iii)

the party is an associate of the Group or a joint venture in which the Group is a venturer;

(iv)

the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;

(v)

the party is a close family member of a party referred in (i) or is an entity under the control, joint control or significant influence of such individuals; or

(vi)

the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

(ee)

Segmental reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these consolidated financial statements.

F-28

3	Turnover

Turnover comprises revenues from airline and airline-related business and is stated net of sales tax. An analysis of turnover is as follows:

	2007 RMB million		2006 RMB million		2005 RMB million

Traffic revenue
Passenger		49,600		41,549		34,328
Cargo and mail		3,697		3,538		3,091

		53,297		45,087		37,419

Other operating revenue
Commission income		281		238		237
General aviation income		108		91		77
Ground services income		241		184		195
Air catering income		81		50		25
Rental income		119		107		69
Others		375		462		271

		1,205		1,132		874

		54,502		46,219		38,293

Pursuant to various sales tax rules and regulations, the Group is required to pay sales tax to national and local tax authorities at the rate of approximately 3% of the traffic revenue in respect of domestic flights and outbound international, Hong Kong and Macau flights. Sales tax incurred by the Group during the year ended December 31, 2007, netted off against revenue, amounted to RMB1,574 million (2006: RMB1,300 million; 2005: RMB1,111 million).

4	Flight operations expenses

	2007 RMB million		2006 RMB million		2005 RMB million

Jet fuel costs		18,316		16,193		11,929
Operating lease charges
- Aircraft and flight equipment		3,735		3,027		2,497
- Land and buildings		320		249		302
Air catering expenses		1,350		1,170		1,150
Aircraft insurance		207		274		283
Flight personnel payroll and welfare		2,226		1,697		1,599
Training expenses		517		389		373
CAAC Infrastructure Development Fund contributions		1,250		1,127		978
Others		1,161		896		650

		29,082		25,022		19,761

F-29

5	Maintenance expenses

	2007 RMB million		2006 RMB million		2005 RMB million

Repairing and maintenance charges		4,111		3,585		4,153
Maintenance materials		532		414		436

		4,643		3,999		4,589

6	Aircraft and traffic servicing expenses

	2007 RMB million		2006 RMB million		2005 RMB million

Landing and navigation fees		6,030		5,343		4,977
Ground service and other charges		2,130		1,720		1,557

		8,160		7,063		6,534

7	Promotion and sales expenses

	2007 RMB million		2006 RMB million		2005 RMB million

Sales commissions		1,789		1,489		1,503
Ticket office expenses		1,016		824		784
Computer reservation services		385		307		292
Advertising and promotion		108		43		32
Others		180		148		169

		3,478		2,811		2,780

8	General and administrative expenses

	2007 RMB million		2006 RMB million		2005 RMB million

General corporate expenses		1,811		1,897		1,266
Auditors’ remuneration		16		15		12
Impairment on aircraft (Note 17(h))		109		—		—
Other taxes and levies		47		29		37

		1,983		1,941		1,315

F-30

9	Depreciation and amortisation

	2007 RMB million			2006 RMB million			2005 RMB million
Depreciation
- Owned assets		4,232			3,678			3,292
- Assets acquired under finance leases		1,365			1,321			1,128
Amortisation of deferred credits		(71	)		(61	)		(20	)
Other amortisation		28			33			40

		5,554			4,971			4,440

10	Staff costs

	2007 RMB million		2006 RMB million		2005 RMB million

Salaries, wages and welfare		5,130		3,854		3,515
Retirement scheme contributions		614		584		472
Early retirement benefits (Note 36)		12		392		—

		5,756		4,830		3,987

Staff costs relating to flight operations, maintenance, aircraft and traffic servicing, promotion and sales and general and administrative expenses are also included in the respective total amounts disclosed separately in Notes 4 to 8 above.

11	Interest expense

	2007 RMB million		2006 RMB million			2005 RMB million

Interest on bank and other loans wholly
repayable within five years		1,986		1,675			995
Interest on other loans		105		138			93
Finance charges on obligations
under finance leases		743		716			626
Other interest expense (Note 36)		15		—			—
Less: borrowing costs capitalised		558		(459	)		(98	)

		2,291		2,070			1,616

The borrowing costs have been capitalised at rates ranging from 5.30% to 5.84% per annum in 2007 (2006: 5.29% to 5.61% per annum; 2005: 4.14% to 5.27% per annum).

F-31

12	Other income / (expenses), net

	2007 RMB million		2006 RMB million		2005 RMB million
Gain / (loss) on sale of property, plant
and equipment, net
- Aircraft and spare engines		106		329		—
- Other property, plant and equipment		24		4		(32	)

		130		333		(32	)

In 2007, the Group recognised a gain on disposal of property, plant and equipment of RMB106 million on selling of 11 MD82 aircraft, three MD82 spare engines and one Boeing 737-500 spare engine to certain independent third parties, being the excess of the sale proceeds over the carrying amounts of the assets and related disposal costs.

In 2006, the Group recognised a gain on disposal of property, plant and equipment of RMB329 million on selling of three Boeing 757-200 aircraft to certain independent third parties, being the excess of the sale proceeds over the carrying amounts of the assets and related disposal costs.

F-32

Title of each class		Name of each exchange on which registered

Ordinary H Shares of par value		New York Stock Exchange, Inc.
RMB1.00 per share
represented by American
Depositary Receipts

U.S. GAAP o	International Financial Reporting Standards þ	Other o
	as issued by the International Accounting
	Standards Board

		Page

FORWARD-LOOKING STATEMENTS		1

INTRODUCTORY NOTE		1

GLOSSARY OF AIRLINE INDUSTRY TERMS		2

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		3

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE		3

ITEM 3. KEY INFORMATION		3

Selected Financial Data		3

Capitalization and Indebtedness		6

Reasons for the Offer and Use of Proceeds		6

Risk Factors		7

ITEM 4. INFORMATION ON THE COMPANY		12

History and Development of the Company		12

Aircraft Acquisitions		13

Capital Expenditure		14

Business Overview		14

Organizational Structure		33

Property, Plant and Equipment		34

ITEM 4A. UNRESOLVED STAFF COMMENTS		36

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS		36

Critical Accounting Policies		36

Recently Pronounced International Financial Reporting Standards		37

Overview		37

Certain Financial Information and Operating Data by Geographic Region		38

Operating Results		39

Liquidity and Capital Resources		44

Contractual Obligations and Commercial Commitments		46

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.		46

Directors, Senior Management and Employees		46

Compensation		52

Board Practices		53

Employees		54

Share Ownership		56

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		56

Major Shareholders		56

Related Party Transactions		56

Interests of Experts and Counsel		62

ITEM 8. FINANCIAL INFORMATION		62

Consolidated Statements and Other Financial Information		62

Significant Changes		62

Legal Proceedings		62

Dividend Information		62

ITEM 9. THE OFFER AND LISTING		62

Offer and Listing Details		62

Plan of Distribution		64

Markets		64

Selling Shareholders		64

Dilution		64

Expenses of the Issue		64

ITEM 10. ADDITIONAL INFORMATION		64

A.	Share Capital	64

B.	Memorandum and Articles of Association	64

C.	Material Contracts	69

D.	Exchange Controls	70

E.	Taxation	71

F.	Dividends and Paying Agents	75

G.	Statement by Experts	75

H.	Documents on Display	75

I.	Subsidiary Information	76

Comparison of New York Stock Exchange Corporate Governance Rules and China Corporate Governance Rules for Listed Companies		76

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		79

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		81

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		81

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		81

ITEM 15. CONTROLS AND PROCEDURES		81

ITEM 16. RESERVED		83

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT		83

ITEM 16B. CODE OF ETHICS		83

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES		83

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE		84

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		84

PART III

ITEM 17. FINANCIAL STATEMENTS		84

ITEM 18. FINANCIAL STATEMENTS		84

ITEM 19. EXHIBITS		85


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


SEC 1852 (05-06)		Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

Capacity Measurements

“available seat kilometers” or “ASKs”		the number of seats made available for sale multiplied by the kilometers flown

“available ton kilometers” or “ATKs”		the number of tons of capacity available for the transportation of revenue load (passengers and cargo) multiplied by the kilometers flown

Traffic Measurements

“revenue passenger kilometers” or “RPKs”		the number of revenue passengers carried multiplied by the kilometers flown

“cargo ton kilometers”		the cargo load in tons multiplied by the kilometers flown

“revenue ton kilometers” or “RTKs”		the load (passenger and cargo) in tons multiplied by the kilometers flown

Yield Measurements

“passenger yield”		revenue from passenger operations divided by RPKs

“cargo yield”		revenue from cargo operations divided by cargo ton kilometers

“average yield”		revenue from airline operations (passenger and cargo) divided by RTKs

“ton”		a metric ton, equivalent to 2,204.6 pounds

Load Factors

“passenger load factor”		RPKs expressed as a percentage of ASKs

“overall load factor”		RTKs expressed as a percentage of ATKs

“breakeven load factor”		the load factor required to equate scheduled traffic revenue with operating costs assuming that total operating surplus is attributable to scheduled traffic operations

Utilization

“utilization rate”		the actual number of flight hours per aircraft per operating day

Equipment

“rotables”		aircraft parts that are ordinarily repaired and reused

“expendables”		aircraft parts that are ordinarily used up and replaced with new parts

	Year ended December 31,
	2007 US$			2007 RMB			2006 RMB			2005 RMB			2004 RMB			2003 RMB
Consolidated Statement of Operations Data:	(in million, except per share data)

Operating revenue		7,461			54,502			46,219			38,293			23,974			17,470
Operating expenses		(7,256	)		(53,013	)		(45,907	)		(39,598	)		(23,065	)		(17,014	)
Operating profit/(loss)		223			1,619			645			(1,337	)		908			434
Profit/(loss) before taxation		400			2,923			357			(1,853	)		220			(511	)
Profit/(loss) for the year		283			2,065			204			(1,846	)		155			(187	)
Profit/(loss) attributable to :
Equity shareholders of the Company		256			1,871			188			(1,848	)		(48	)		(358	)
Minority interests		27			194			16			2			203			171
Basic and diluted earnings/(loss) per share		0.06			0.43			0.04			(0.42	)		(0.01	)		(0.09	)
Basic and diluted earnings/(loss) per ADR		2.93			21.39			2.15			(21.12	)		(0.55	)		(4.68	)
Cash dividends declared per share		—			—			—			—			—			—

	As of December 31,
	2007 US$		2007 RMB		2006 RMB		2005 RMB		2004 RMB		2003 RMB
Consolidated Balance Sheet Data:	(in million)

Cash and cash equivalents		524		3,824		2,264		2,901		3,083		2,080
Other current assets		680		4,966		4,419		4,320		4,286		1,922
Property, plant and equipment, net		8,001		58,441		56,335		54,254		46,841		28,536
Total assets		11,217		81,933		75,584		71,402		62,383		39,062
Bank and other loans, including long-term bank and other loans due within one year		3,415		24,948		23,822		16,223		11,518		7,097
Obligations under finance leases due within one year		394		2,877		3,091		3,373		2,144		1,298
Bank and other loans, excluding balance due within one year		1,242		9,074		10,018		12,740		11,935		4,522
Obligations under finance leases, excluding balance due within one year		1,760		12,858		12,307		12,459		9,599		5,543
Total equity		2,014		14,712		12,121		11,936		13,903		13,569

	Year ended December 31,
Capacity	2007		2006		2005		2004		2003
ASK (million)		109,733		97,059		88,361		53,769		40,867
ATK (million)		14,208		12,656		11,509		7,446		5,921
Kilometers flown (thousand)		675,127		594,957		539,844		324,827		249,068
Hours flown (thousand)		1,075		931		846		501		385
Number of landing and take-offs		543,789		481,810		438,674		274,580		214,190
Traffic
RPK (million)		81,727		69,582		61,923		37,196		26,387
RTK (million)		9,250		8,071		7,284		4,663		3,561
Passengers carried (thousand)		56,903		49,206		44,119		28,207		20,470
Cargo and mail carried (tons)		872,000		819,000		775,000		545,000		464,000
Load Factors
Passenger load factor (RPK/ASK) (%)		74.5		71.7		70.1		69.2		64.6
Overall load factor (RTK/ATK) (%)		65.1		63.8		63.3		62.6		60.1
Breakeven load factor (%)		64.8		64.9		67.0		61.9		61.6
Yield
Yield per RPK (RMB)		0.61		0.60		0.55		0.57		0.57
Yield per cargo and mail ton kilometers (RMB)		1.87		1.89		1.75		1.67		1.62
Yield per RTK (RMB)		5.76		5.59		5.14		5.01		4.76
Fleet
— Boeing		177		159		140		137		108
— Airbus		119		103		71		46		24
— McDonnell Douglas		25		36		36		35		—
— Others		11		11		14		13		—
Total aircraft in service at period end		332		309		261		231		132
Overall utilization rate (hours per day)		9.4		9.5		9.6		9.9		8.5
Financial
Operating cost per ATK (RMB)		3.73		3.63		3.44		3.10		2.87

Period	Period End		Average(1) (RMB per US$)		High		Low
Annual Exchange Rate
2003		8.2767		8.2772		8.2800		8.2769
2004		8.2765		8.2765		8.2889		8.2641
2005		8.0694		8.1825		8.2767		8.0702
2006		7.8041		7.9723		8.0702		7.8041
2007		7.2946		7.6058		7.8127		7.2946

Period	High		Low
Monthly Exchange Rate
December 2007		7.4120		7.2946
January 2008		7.2946		7.1818
February 2008		7.1973		7.1100
March 2008		7.1110		7.0105
April 2008		7.0185		6.9840
May 2008		7.0000		6.9377
June 2008 (up to June 19, 2008)		6.9633		6.8770

	Passenger carried					Cargo and Mail Carried (tons)					Total traffic (tons kilometers)
Year	Total (in million)		Increase (decrease) over previous year (%)			Total (in thousand)		Increase (decrease) over previous year (%)			Total (in million)		Increase (decrease) over previous year (%)
2003		20.47		(4.7	)		464.0		(1.3	)		3,561.0		(1.5	)
2004		28.21		37.8			545.0		17.5			4,663.0		30.9
2005		44.12		56.4			775.0		42.2			7,284.0		56.2
2006		49.21		11.6			819.0		5.7			8,071.0		10.8
2007		56.90		15.6			872.0		6.5			9,250.0		14.6

Model	Number of Aircraft		Average age (years)		Average Passenger Capacity
Boeing 777-200		4		11.53		380
Boeing 777-21B		6		9.20		292
Boeing 757-200		31		8.81		200
Boeing 747F		2		5.42		n/a
Boeing 737-800		58		1.89		167
Boeing 737-700		43		3.58		138
Boeing 737-500		8		13.57		130
Boeing 737-300		25		13.14		145
Airbus 300-600		6		12.96		272
Airbus 319-100		33		2.24		128
Airbus 320-200		49		5.09		158
Airbus 321-200		23		2.54		182
Airbus 330-200		6		2.04		264
Airbus 330-300		2		0.04		292
McDonnell Douglas 82		12		15.04		144
McDonnell Douglas 90		13		9.85		157
Embraer 145 Jet		6		3.23		50
ATR-72		5		9.95		72
Total		332

Model	Capital Lease		Operating Lease		Average Remaining Lease Term
Boeing 777-200 and 777-21B		4		4		2.96
Boeing 757-200		0		11		2.53
Boeing 737-700		9		15		6.46
Boeing 737-800		10		28		7.61
Boeing 737-500		0		8		0.81
Boeing 737-300		0		4		5.20
Airbus 300-600		1		0		0.07
Airbus 319-100		6		27		7.83
Airbus 320-200		25		16		6.24
Airbus 321-100		6		13		9.55
Airbus 330-200 and 330-300		4		4		9.97
McDonnell Douglas 90		4		0		0.46
Total		69		130

	Passenger carried				Cargo and Mail Carried (tons)				Total traffic (ton kilometers)
Year	Industry Total (in millions)		Group’s Share (% of total)		Industry Total (in thousands)		Group’s Share (% of total)		Industry Total (in billion)		Group’s Share (% of total)
2000		67.2		24.9		1,967		22.5		12.3		20.0
2001		75.2		25.4		1,709		23.3		14.1		21.5
2002		85.9		25.0		2,021		23.3		16.5		21.9
2003		87.6		23.4		2,190		21.2		17.1		20.8
2004		121.2		23.3		2,770		19.7		23.1		20.2
2005		138.3		31.8		3,067		25.3		26.1		27.9
2006		159.7		30.8		3,494		23.4		30.6		26.4
2007		185.8		30.6		4,018		21.7		36.5		25.3

				Cargo and Mail
Airport	Passenger carried (% of total)			Carried (% of total)			Departing flight (% of total)
Beijing		18.39	%		12.21	%		17.17	%
Shanghai Pudong		9.32	%		3.26	%		10.00	%
Guangzhou		50.46	%		39.61	%		50.85	%
Shanghai Hongqiao		17.57	%		22.39	%		16.39	%
Shenzhen		30.10	%		23.41	%		28.97	%
Chengdu		14.26	%		16.20	%		12.60	%
Kunming		17.18	%		20.97	%		16.09	%
Hangzhou		38.72	%		35.06	%		36.64	%
Xi'an		18.66	%		21.37	%		17.12	%
Chongqing		24.91	%		27.44	%		22.86	%

				Cargo and Mail
Airport	Passenger carried (% of total )			Carried (% of total)			Departing flight (% of total)
Wuhan		39.59	%		47.65	%		34.93	%
Changsha		51.17	%		69.45	%		50.37	%
Haikou		28.57	%		29.6	%		27.85	%
Sanya		35.32	%		33.9	%		36.76	%
Zhengzhou		58.67	%		63.32	%		51.78	%
Guilin		39.02	%		39.11	%		37.98	%
Nanning		43.06	%		39.14	%		38.61	%
Zhang Jia Jie		39.59	%		67.78	%		40.31	%

Name of company	Place and date of establishment /operation		Proportion of ownership interest held by the Company
Southern Airlines (Group) Shantou Airlines Company Limited		PRC July 20, 1993		60	%
Zhuhai Airlines Company Limited		PRC May 8, 1995		60	%
Xiamen Airlines Company Limited		PRC August 11, 1984		60	%
Guizhou Airlines Company Limited		PRC November 12, 1991		60	%
Chongqing Airlines Company Limited		PRC June 16, 2007		60	%
Guangzhou Air Cargo Company Limited		PRC March 31, 2004		70	%
Guangzhou Nanland Air Catering Company Limited		PRC November 21, 1989		75	%
China Southern West Australian Flying College Pty Ltd.		Australia January 26, 1971		65	%
Guangzhou Baiyun International Logistics Company Ltd		PRC July 23, 2002		61	%
Xinjiang Civil Aviation Property Management Limited		PRC February 12, 2002		51.8	%
Southern Airlines Group Air Catering Company Limited		PRC December 25, 2003		100	%
Nanlung International Freight Company Limited		Hong Kong October 1, 1996		51	%

	Land (in square meters)				Buildings (in square meters)
	Owned		Leased		Owned		Leased

Guangzhou		123,962		130,438		529,375		7,277
Shenzhen		208,740		—		54,093		—
Zhuhai		170,062		—		18,791		—
Changsha		138,949		—		47,190		—
Zhengzhou		290,841		—		60,582		—
Haikou		5,265		—		63,570		19,633
Wuhan		—		31,061		17,335		22,831
Nanyang		—		—		12,156		60,003
Sanya		106,680		—		16,968		—
Shenyang		—		167,502		79,626		93,445
Dalian		—		14,403		17,250		33,597
Jilin		—		65,076		33,656		7,767
Harbin		—		286,871		36,925		3,188
Xinjiang		—		545,146		177,710		4,135
Guilin		72,563		—		73,379		139

	Land (in square meters)				Buildings (in square meters)
	Owned		Leased		Owned		Leased

Xiamen		579,530		—		436,617		19,113
Shantou		36,931		55,407		42,682		—
Zhuhai		94,024		—		44,351		2,245
Guizhou		259,879		—		95,705		3,533
Chongqing		—		—		—		3,009

Traffic	Year ended December 31,						2007 vs. 2006			2006 vs. 2005
	2007		2006		2005		% increase (decrease)			% increase (decrease)
RPK (million)
Domestic		68,369		58,128		51,472		17.6			12.9
Hong Kong and Macau		1,180		1,541		1,549		(23.4	)		(0.5	)
International		12,178		9,913		8,902		22.8			11.4
Total		81,727		69,582		61,923		17.5			12.4
RTK (million)
Domestic		7,219		6,226		5,571		15.9			11.8
Hong Kong and Macau		115		156		159		(26.3	)		(1.9	)
International		1,916		1,689		1,554		13.4			8.7
Total		9,250		8,071		7,284		14.6			10.8
Passengers carried (thousand)
Domestic		51,326		44,225		39,545		16.1			11.8
Hong Kong and Macau		1,339		1,545		1,556		(13.3	)		(0.7	)
International		4,238		3,436		3,018		23.3			13.9
Total		56,903		49,206		44,119		15.6			11.5
Cargo and mail carried (thousand tons)
Domestic		733		674		639		8.8			5.5
Hong Kong and Macau		12		16		19		(25.0	)		(15.8	)
International		127		129		117		(1.6	)		10.3
Total		872		819		775		6.5			5.7

Capacity	Year ended December 31,						2007 vs. 2006 % increase (decrease)			2006 vs. 2005 % increase (decrease)
	2007		2006		2005
ASK (million)
Domestic		89,452		79,773		72,107		12.1			10.6
Hong Kong and Macau		1,881		2,459		2,656		(23.5	)		(7.4	)
International		18,400		14,827		13,598		24.1			9.0
Total		109,733		97,059		88,361		13.1			9.8
ATK (million) Domestic		10,440		9,311		8,352		12.1			11.5
Hong Kong and Macau		210		289		315		(27.3	)		(8.3	)
International		3,558		3,056		2,842		16.4			7.5
Total		14,208		12,656		11,509		12.3			10.0
Load Factors
Passenger load factor (RPK/ASK) (%)
Domestic		76.4		72.9		71.4		4.8			2.1
Hong Kong and Macau		62.7		62.7		58.3		0.0			7.5
International		66.2		66.9		65.5		(1.0	)		2.1
Overall		74.5		71.7		70.1		3.9			2.3
Overall load factor (RTK/ATK) (%)
Domestic		69.1		66.9		66.7		3.3			0.3
Hong Kong and Macau		55.1		54.0		50.4		2.0			7.1
International		53.8		55.3		54.7		(2.7	)		1.1
Overall		65.1		63.8		63.3		2.0			0.8
Yield
Yield per RPK (RMB)
Domestic		0.60		0.59		0.55		1.7			7.3
Hong Kong and Macau		0.91		0.80		0.77		13.8			3.9
International		0.63		0.62		0.56		1.6			10.7
Overall		0.61		0.60		0.55		1.7			9.1
Yield per RTK (RMB)
Domestic		5.89		5.74		5.30		2.6			8.3
Hong Kong and Macau		9.91		8.52		8.18		16.3			4.2
International		5.03		4.77		4.24		5.5			12.5
Overall		5.76		5.59		5.14		3.0			8.8
Financial
Passenger revenue (RMB million)
Domestic		40,818		34,174		28,182		19.4			21.3
Hong Kong and Macau		1,074		1,230		1,194		(12.7	)		3.0
International		7,708		6,145		4,952		25.4			24.1
Total		49,600		41,549		34,328		19.4			21.0
Cargo and mail revenue (RMB million)		3,697		3,538		3,091		4.5			14.5

	2008		2009		2010		2011		2012 and afterwards		Total
	(RMB million)
Acquisition of aircraft and related equipment		19,125		20,767		20,065		12,747		16,038		88,742
Others		1,211		694		335		196		22		2,458
		20,336		21,461		20,400		12,943		16,060		91,200

	As of December 31, 2007 Payment due by period										As of December 31, 2006
	Total		Less than 1 year		1-3 years		3-5 years		After 5 years		Total
	(RMB million)

Contractual obligations (Note 1)
Short-term bank loans		22,003		22,003		—		—		—		20,536
Long-term bank and other loans		14,501		4,230		5,449		2,607		2,215		16,378
Obligations under finance leases		19,499		3,588		4,214		3,445		8,252		18,773
Total contractual obligations		56,003		29,821		9,663		6,052		10,467		55,687

Other commercial commitments
Operating lease commitments		28,179		3,512		7,099		6,737		10,831		21,969
Aircraft purchase commitments (Note 2)		88,742		19,125		40,832		28,785		—		66,881
Other capital commitments		2,458		1,211		1,029		218		—		1,824
Investing commitments		133		133		—		—		—		83
Total commercial obligations		119,512		23,981		48,960		35,740		10,831		90,757

Name	Position	Gender		Age
Liu Shao Yong	Chairman of the Board		Male		50
Li Wen Xin	Director		Male		58
Wang Quan Hua	Director		Male		54
Zhao Liu An	Director		Male		60
Si Xian Min	Director, President		Male		51
Tan Wan Geng	Director, Executive Vice President		Male		44
Xu Jie Bo	Director, Executive Vice President, Chief Financial Officer		Male		43
Chen Zhen You	Director		Male		56
Peter Lok (retired on June 28, 2007)	Independent Non-executive Director		Male		71
Wei Ming Hai (retired on June 28, 2007)	Independent Non-executive Director		Male		43
Wang Zhi	Independent Non-executive Director		Male		66
Sui Guang Jun	Independent Non-executive Director		Male		47
Gong Hua Zhang (appointed on June 28, 2007)	Independent Non-executive Director		Male		62
Lam Kwong Yu (appointed on June 28, 2007)	Independent Non-executive Director		Male		64
Sun Xiao Yi	Chairman of the Supervisory Committee		Male		54
Yang Guang Hua	Supervisor		Male		55
Yang Yi Hua	Supervisor		Female		48
Liang Zhong Gao	Supervisor		Male		52
Liu Biao (resigned on January 18, 2008)	Supervisor		Male		42
He Zong Kai	Executive Vice President		Male		57
Liu Qian	Executive Vice President		Male		42
Zhang Zi Fang	Executive Vice President		Male		49
Dong Su Guang	Executive Vice President		Male		54
Zhang Zheng Rong	Chief pilot		Male		45
Hu Chen Jie	Chief Information Officer		Male		39
Tang Bing	Chief Engineer		Male		41
Su Liang	Chief Economist		Male		46
Xie Bing	Company Secretary		Male		35
Chen Wei Hua	Chief Legal Adviser		Male		42

	Note		Directors’ fees RMB’000		Salaries, allowances and benefits in kind RMB’000		Discretionary bonus RMB’000		Retirement scheme contributions RMB’000		Total RMB’000
Executive directors
Liu Shao Yong		(i)		—		737		—		14		751
Li Wen Xin				—		329		—		14		343
Wang Quan Hua				—		597		—		14		611
Zhao Liu An		(i)		—		576		—		14		590
Si Xian Min				—		670		—		13		683
Tan Wan Geng				—		542		—		13		555
Xu Jie Bo				—		529		—		13		542
Chen Zhen You				—		513		—		16		529
Supervisors
Sun Xiao Yi				—		597		—		14		611
Yang Guang Hua				—		565		—		8		573
Yang Yi Hua				—		209		—		16		225
Liang Zhong Gao		(iii)		—		232		—		12		244
Liu Biao		(iv)		—		134		—		2		136
Independent non-executive directors
Peter Lok		(ii)		49		—		—		—		49
Wei Ming Hai		(ii)		50		—		—		—		50
Gong Hua Zhang		(iii)		50		—		—		—		50
Wang Zhi				100		—		—		—		100
Sui Guang Jun				100		—		—		—		100
Lam Kwong Yu		(iii)		48		—		—		—		48
Total				397		6,230		—		163		6,790

Name	Number of Shares		Approximate Percentage of the Total Number of Shares

CSAHC		2,200,000,000 domestic shares		50.30	%
HKSCC Nominees Limited		1,162,215,598 H shares		26.57	%

Name		Number of H Shares			Approximate Percentage of the Total Number of H Shares
HKSCC Nominees Limited			1,162,215,598			98.98	%

	The Hong Kong Stock Exchange Price per H Share (HK$)				The New York Stock Exchange Price per ADR (US$)				The Shanghai Stock Exchange Price per A Share (RMB)
	High		Low		High		Low		High		Low

Annual Market Prices
Fiscal Year ended December 31, 2003		3.50		1.46		22.78		9.53		5.34		3.75
Fiscal Year ended December 31, 2004		4.68		2.47		29.73		15.95		6.87		3.96
Fiscal Year ended December 31, 2005		3.10		1.83		19.93		11.68		5.30		2.23
Fiscal Year ended December 31, 2006		3.42		1.60		22.43		10.51		4.09		2.24
Fiscal Year ended December 31, 2007		13.90		3.25		94.48		20.81		28.73		4.26
Quarterly Market Prices
Fiscal Year ended December 31, 2006
First Quarter		2.45		2.18		15.82		14.00		2.97		2.48
Second Quarter		2.30		1.66		14.96		10.82		2.92		2.24
Third Quarter		2.25		1.60		14.86		10.51		2.94		2.27
Fourth Quarter		3.42		2.29		22.43		14.06		4.09		2.95
Fiscal Year ended December 31, 2007
First Quarter		4.22		3.25		26.82		20.81		7.43		4.26
Second Quarter		5.59		3.37		35.64		21.80		9.48		7.80
Third Quarter		13.90		5.01		94.48		32.37		28.73		8.42
Fourth Quarter		12.08		7.97		77.97		49.45		27.95		19.08
Monthly Market Prices
December 2007		10.28		8.47		65.45		54.55		27.95		23.98
January 2008		10.44		6.70		65.31		43.99		28.68		20.06
February 2008		8.08		7.18		50.63		45.74		22.74		18.94
March 2008		7.92		5.13		50.76		33.96		21.58		12.98
April 2008		6.16		4.50		41.48		29.77		16.61		10.27
May 2008		5.70		4.40		36.00		28.24		13.92		10.28
June 2008 (up to June 19, 2008)		5.02		3.67		31.34		23.42		10.99		7.06

NYSE corporate governance rules		Corporate governance rules applicable to the domestically listed companies in China and the Company’s governance practices

Director Independence A listed company must have a majority of independent directors on its board of directors. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). In addition, a director must meet certain standards to be deemed independent. For example, a director is not independent if the director is, or has been within the last three years, an employee of the listed company, or if the director has received, during any twelve-month period within the last three years, more than US$100,000 in direct compensation from the listed company.		Director Independence Any listed company must establish an independent director system and set forth specific requirements for the qualification of independent directors. An independent director shall not hold any other position in the listed company other than being a director and shall not be influenced by the main shareholders or the controlling persons of the listed company, or by any other entities or persons with whom the listed company has a significant relationship. The Company’s governance practices The Company has complied with the relevant Chinese corporate governance rules and has implemented internal rules governing the independence and responsibilities of independent directors. The Company determines the independence of independent directors every year.

The non-management directors of each listed company must meet at regularly scheduled executive sessions without management.		No similar requirements.

Nominating/Corporate Governance Committee Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. The nominating/corporate governance committee must have a written charter that addresses the committee’s purposes and responsibilities which, at minimum, must be to: search for eligible people for the board of directors, select and nominate directors for the next session of the shareholders’ annual meeting, study and propose corporate governance guidelines, supervise the evaluation of the board of directors and management, and evaluate the performance of the committee every year.		Nominating/Corporate Governance Committee The board of directors of a listed company may, through the resolution of the shareholders’ meeting, establish a nominating committee composed entirely of directors, of which the independent directors shall be the majority and the convener. The Company’s governance practices The Company has established a nominating committee. As at December 31, 2007, the Nomination Committee consists of three members, Messrs Liu Shao Yong, Wang Zhi and Gong Hua Zhang. Most of them are independent directors and Mr. Liu Shao Yong acts as the chairman. The responsibilities of the Nomination Committee are to make recommendations to the Board in respect of the size and composition of the Board based on the operational activities, assets and shareholding structure of the Company; study the selection criteria and procedures of directors and executives and give advice to the Board; identify qualified candidates for directors and executives; investigate and propose candidates for directors and managers and other senior management members to the Board.

Compensation Committee Listed companies must have a compensation committee composed entirely of independent directors.		Compensation Committee The board of directors of a listed company can, through the resolution of shareholders’ meeting, have a compensation and evaluation committee composed entirely of directors, of whom the independent directors are the majority and act as the convener.

		The Company’s governance practices The Company has established a remuneration committee consisting of three members. The remuneration committee is chaired by independent non-executive Director Sui Guang Jun with independent non-executive Director Gong Hua Zhang and executive Director Wang Quan Hua as members.

The written charter of the compensation committee must state, at least, the following purposes and responsibilities: (1) review and approve the corporate goals associated with CEO’s compensation, evaluate the performance of the CEO in fulfilling these goals, and based on such evaluation determine and approve the CEO’s compensation level; (2) make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval; (3) produce a committee report on executive compensation as required by the SEC to be included in the annual proxy statement or annual report filed with the SEC. The charter must also include the requirement for an annual performance evaluation of the compensation committee.		The responsibilities are similar to those stipulated by the NYSE rules, but the committee is not required to produce a report on the executive compensation or make an annual performance evaluation of the committee. The responsibilities of the remuneration committee are to approve the remuneration packages of Directors and senior management of the Group, and the Company’s “preliminary proposals on annual emoluments of the directors and senior management of the Group”. The remuneration committee is also responsible for assessing performance of executive director and approving the terms of executive directors’ service contracts.

Audit Committee Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 of Exchange Act. It must have a minimum of three members, and all audit committee members must satisfy the requirements for independence set forth in Section 303A.02 of NYSE Corporate Governance Rules as well as the requirements of Rule 10A-3b (1) of the Exchange Act.		Audit Committee The board of directors of a listed company can, through the resolution of the shareholders’ meeting, establish an audit committee composed entirely of directors, of which the independent directors are the majority and act as the convener, and, at minimum, one independent director is an accounting professional.

The written charter of the audit committee must specify that the purpose of the audit committee is to assist the board oversight of the integrity of financial statements, the company’s compliance with legal and regulatory requirements, qualifications and independence of independent auditors and the performance of the listed company’s internal audit function and independent auditors. The written charter must also require the audit committee to prepare an audit committee report as required by the SEC to be included in the listed company’s annual proxy statement as well as an annual performance evaluation of the audit committee.		The responsibilities of the audit committee are similar to those stipulated by the NYSE rules, but according to the domestic practices, the Company is not required to make an annual performance evaluation of the audit committee and the audit committee is not required to prepare an audit report to be included in the Company’s annual proxy statement. The Company’s governance practices The Board of Directors of the Company has established an audit committee that satisfies relevant domestic requirements and the audit committee has a written charter.

Each listed company must have an internal audit department.		China has a similar regulatory provision, and the Company has an internal audit department.

Shareholders must be given the opportunity to vote on equity-compensation plans and material revisions thereto, except for employment incentive plans, certain awards and plans in the context of mergers and acquisitions.		The relevant regulations of China require the board of directors to propose plans and types of director compensation for the shareholders’ meeting to approve. The compensation plan of executive officers is subject to approval by the board and announced at the shareholders’ meeting and disclosed to the public upon the approval of the board of directors. The approval of director compensation and compensation plan of executive officers of the Company satisfies relevant domestic requirements.

Corporate Governance Guidelines Listed companies must adopt and disclose corporate governance guidelines, involving director qualification standards, director compensation, director continuing education, annual performance evaluation of the board of directors, etc.		Corporate Governance Guidelines China Securities Regulatory Commission (“CSRC”) has issued the Corporate Governance Rules, with which the Company has complied.

Code of Ethics for Directors, Officers and Employees Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.		Code of Ethics for Directors, Officers and Employees China does not have such requirement for a code for ethics. But, the directors and officers must perform their legal responsibilities in accordance with the Company Law of PRC, relative requirements of CSRC and Mandatory Provisions to the Charter of Companies Listed Overseas.

		The Company’s governance practices The Company does not have, in form, a code of ethics that applies to the president, chief financial officer and principal accounting officer, or collectively, the senior corporate officers. The senior executive officers, all of whom currently serve as our directors, are subject to the director service contracts that they have with the Company. Under the director service contracts, the directors, including the senior corporate officers, agree that each director owes a fiduciary and diligence obligation to the Company and that no director shall engage in any activities in competition with the Company’s business or carry any activities detrimental to the interests of the Company. Each of the directors, including the senior corporate officers, also agreed to perform their respective duties as directors and senior officers in accordance with the Company Law of the PRC, relevant rules and regulations promulgated by China Securities Regulatory Commission and the Mandatory Provisions of Articles of Association of Overseas Listed Companies.

Exhibit No.		Description of Exhibit
1.1		Amended Articles of Association of China Southern Airlines Company Limited (incorporated by reference to Exhibit 1.1 to our Annual Report on Form 20-F for fiscal year 2006 filed with the Securities and Exchange Commission (File Number: 001-14660) for the year ended December 31, 2006 with the Securities and Exchange Commission on June 29, 2007)

4.1		Form of Director’s Service Agreement (Incorporated by reference to the Exhibit 4.1 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2005 filed with the Securities and Exchange Commission on June 30, 2006)

4.2		Form of Non-Executive Director’s Service Agreement (Incorporated by reference to the Exhibit 4.2 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2005 filed with the Securities and Exchange Commission on June 30, 2006)

8.1		Subsidiaries of China Southern Airlines Company Limited

10.1		Airbus Aircraft Acquisition Agreement entered into between China Southern Airlines Company Limited and Airbus dated July 6, 2006 (Incorporated by reference to the Exhibit 99.1 to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on July 11, 2006)

10.2		Boeing Aircraft Acquisition Agreement entered into between China Southern Airlines Company Limited and Boeing dated October 13, 2006 (Incorporated by reference to the Exhibit 99.1 to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on October 17, 2006)

10.3		Xiamen Aircraft Acquisition Agreement entered into between Xiamen Airlines and Boeing dated October 13, 2006 (Incorporated by reference to the Exhibit 99.1 to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on October 17, 2006)

10.4		Airbus Aircraft Acquisition Agreement entered into between the Company and Airbus dated on July 16, 2007 (Incorporated by reference to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on July 17, 2007)

10.5		Xiamen Aircraft Acquisition Agreement entered into between Xiamen Airlines and Boeing dated on July 16, 2007 (Incorporated by reference to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on July 17, 2007)

10.6		Boeing Aircraft Acquisition Agreement entered into between the Company and Boeing dated on August 20, 2007 (Incorporated by reference to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on August 21, 2007)

10.7		Airbus Aircraft Acquisition Agreement entered into between the Company and Airbus dated on October 23, 2007 (Incorporated by reference to the Exhibit 99.1 to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on October 23, 2007)

10.8		Boeing Aircraft Acquisition Agreement between Xiamen Airlines and Boeing dated April 18, 2008 (Incorporated by reference to the Exhibit 99.1 to our Form 6-K (File No. 001-14660) filed with the Securities and Exchange Commission on April 22, 2008)

12.1		Section 302 Certification of President