The Use of Fundraising

Hainan Airlines Co., Ltd raised funds with capital paid-in topped 5.6 billion yuan by newly issued stock. Issued by China Securities Regulatory Commission, the Inform of the Seasoned Equity Offering by Hainan Airlines agreed the company to issue corporate shares of not exceeding 2.8 billion shares. The fundraising has finished with this announcement and has been audited by Asia Pacific Zhonghui Certified Public Accountant. Registration has been made at Shanghai branch of China Registration & Accounting Company.

1. The use of the funds is restricted to the resolution of the 11th session board meeting of Hainan Airlines and the 2005 temporary shareholders¡¯ meeting of Hainan Airlines. The funds will be used to: purchase minority shareholdings, pay back the bank loan, order new aircrafts and improve liquidity.

Details about the use of the raised funds are listed as below:

Purchase minority shares: the company is bargaining with the minority shareholders and there¡¯s no final settlement yet.

Order new aircrafts: costs for aircrafts import and pay off as the payment progress

To tighten supervision and management over the use of the funds, the funds will temporarily be kept by Hainan Airlines Financing Company as the shareholders have asked for. The funds will be given to the designated projects as needed.

2. Non-financed projects

There¡¯s no non-financed project within this period of announcement.