China Southern Airlines (NYSE: ZNH) (HKSE: 1055), the largest airline in The People`s Republic of China, has inked a new agreement with China State Post Bureau which will secure China Southern`s position as the premier cargo, mail and overnight mail carrier in China.

“With the lucrative next-day, overnight mail business booming in China, China Southern Airlines has today positioned itself as China`s answer to Federal Express,” said Mr. Wang Changshun, President, China Southern Airlines.

China State Post Bureau and China Southern Airlines inked the formal pact here in Beijing to consolidate and jointly operate China Postal Airlines. After the consolidation is completed, the China State Post Bureau will retain 51% share of China Postal Airlines and China Southern Airlines will inject RMB 150 million ($18M US) in cash and acquire 49% of the entire equity capital of China Postal.

This is yet another major step forward between China Southern Airlines and China Post since its first collaboration began on June 18, 2000 and will boost China Southern`s 23 percent market share of China`s cargo business.

The China Southern/China Post pact comes nearly on the heels on the delivery of China Southern Airlines` first ¬C and China`s only ¬C Boeing 747-400 freighter, taken Wednesday in Seattle.

Based in Shanghai, China Postal Airlines operates air routes between Beijing, Chengdu, Guangzhou, Shenyang and Shenzhen. Mr. Wang added that, “China Postal Airlines` future growth has been constrained by its own business environment - due to the small operation scale and insufficient capacity ¬C and its current flights, aircraft maintenance and operations are just not able to meet the demand of a sustained development. China Postal Airlines` current mail transport aircraft performance is relatively backward,” added Mr. Wang. As such, the China State Post Bureau had been actively seeking an outside aviation partner which would merge with and recreate a stronger China Postal Airlines. “China Post has always had a very good relationship with China Southern Airlines,“said Mr. Wang, adding that, “as the largest carrier in The People`s Republic of China, China Southern Airlines will be able to provide multiple support to China Postal Airlines with its strength in aviation business, flight safety management, flight crew and maintenance team.”

With a potential market base of 1.2 Billion domestic customers, China Postal Airlines has a huge potential in mail air transportation and significant ground logistics transport capability. All these benefits will provide powerful support for the new China Postal Airlines (after merging with China Southern Airlines). According to Mr. Wang, China Postal Airlines and China Southern Airlines will “unify their routing layout and flight schedules and China Postal will enlarge its flight fleet.” The new plan calls for passenger & cargo transferable aircraft to be used not only for evening mail transportation by China Postal, but to be leased by China Southern Airlines on daytime passenger flights, thus maximizing aircraft use, lower operating costs and generate significant revenues for the new organization. Signing the agreement for the China State Post Bureau was Mr. Ma Junsheng, Deputy Director General. Also in attendance at the signing were representatives from China State Planning Commission, Information Industry Ministry and the CAAC. The largest airline in The People`s Republic of China for the past 23 years, China Southern Airlines www.cs-air.com/en connects more than 80 cities around the globe. Major business and vacation destinations served in China include: Beijing, Chengdu, Guangzhou, Guilin, Hong Kong, Kunming, Shanghai, Shenzhen and Wuhan and as well as International service, including: Amsterdam, Bangkok, Fukuoka, Hanoi, Ho Chi Minh City, Kuala Lumpur, Jakarta, Los Angeles, Manila, Melbourne, Osaka, Penang, Phnom Penh, Seoul, Singapore, Sydney and Tokyo.

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