FOR IMMEDIATE RELEASE
27 April 1999

China Eastern Airlines Corporation Limited ("Eastern Airlines" or the "Group") announced today its audited results for the year 1998. For the year ended 31 December 1998, the Group suffered a loss of RMB481 million. The directors did not recommend any dividend for the year 1998.

Owing to the region's financial crisis and fierce competition among airlines, 1998 was a difficult year for the Group. However, it managed to experience growth in some areas of its business. Traffic volume increased 12.25% to 1.448 billion tonne-kilometers over the same period in 1997. Average aircraft daily utilisation rose by 0.5 hours to 7.7 hours compared to 1997 figures. But total revenues of its main business declined 5.25% to RMB7.792 billion from the same period in 1997.

Passenger revenues declined 5.07% to RMB6.542 billion, which represented 80.05% of total revenue of the Group, notwithstanding the rise in passenger volume by 8.36% to 10.891 billion passenger kilometers. Hong Kong passenger revenues also decreased, down 16.88% to RMB1.546 billion, representing 23.63% of total passenger revenues. Passenger traffic volume on Hong Kong routes dropped 5.51% compared with the same period last year. International passenger revenues slid 9.43% from the previous year to RMB1.969 billion, representing 30.10% of total passenger revenues despite a 6.42% increase to 4.709 billion passenger-kilometers. Cargo revenues also decreased, slipping 6.17% to RMB1.250 billion, representing 15.30% of total revenues, despite an increase in traffic volume to 491 million-tonne kilometers, up 22.14% over the same period last year.

Accounting for the drop in revenues were: (1) a decline in revenues in the Group's Asian routes due to the region's financial turmoil and the depreciation of currencies in some Asia countries, which dampened the demand; and (2) keen competition among airlines amidst a slowdown of China's GDP growth, leading to a price war.

Further affecting the Group's performance was the rise in operating costs by 12.15% to RMB7.997 billion from 1997 figures owing to increases in variable costs and depreciation charges and overhaul expenses resulting from an increase in capacity given increased utilisation of aircraft and the purchase of new planes.

Looking forward, the Group expects the region's financial crisis to continue to influence its operations and the market negatively. Its outlook for the domestic market is not rosy either with the anticipated slowdown of China's economy, reducing demand for domestic flights. Moreover, competition in both the domestic and international markets is expected to intensify, putting pressure on ticket prices.

Given such scenarios and the current conditions, the Civil Aviation Administration of China will introduce measures to better the operating environment of domestic airlines.

Among these are standardising domestic airfares; strengthening macro-control by containing the expansion of traffic capacity; suspending approval of new trunk aircraft orders; delaying or considering where appropriate the cancellation of the delivery of contracted aircraft; encouraging the sublease, sale and purchase of aircraft among domestic carriers; and further lowering the civil aviation infrastructure levy imposed on domestic carriers.

The Group expects the measures to have a positive effect on its operations. Meanwhile, in response to the current environment, the Group will reduce capacity and streamline its fleet on the basis of estimated demand; enlarge the scope of code sharing with other carriers and strengthen business cooperation; and control costs by rationalising its route network, adjusting flights to reduce variable costs, monitoring inventory growth rate and adopting a prudent investment approval procedure.

Listed on the Hong Kong Stock Exchange and the New York Stock Exchange in February 1997, and on the Shanghai Stock Exchange in November 1997, China Eastern Airlines is one of the three largest air carriers in China and the primary air carrier serving Shanghai, China's eastern gateway. As at 31 December, 1998, the Company operated 129 routes, 108 of which were domestic routes (including 12 Hong Kong routes) and 12 were international routes. It operated 1,400 scheduled flights per week, covering 60 domestic and international cities. The Company has a fleet of 71 aircraft, including 53 passenger jet aircraft with seats over 100 each and 1 jet freighter aircraft.

Issued by:		China Eastern Airlines Corporation Limited
Through:		Keith Statham Associates PR Tel: 2810 8108     Fax: 2869 1022
Contact:		Philip Hui - dir. line 2801 0016

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