CIRCULAR FOR THE 2024 ANNUAL GENERAL MEETING

If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares of Air China Limited, you should at once hand this circular and the form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

中國國際航空股份有限公司

AIR CHINA LIMITED

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 00753)

(1) CONTINUING CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION: THE CNACG FRAMEWORK AGREEMENT

(2) CONTINUING CONNECTED TRANSACTION: THE NEW FRAMEWORK AGREEMENT

(3)  PROPOSED CHANGE OF AUDITORS

(4)  PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND THE ABOLISHMENT OF THE SUPERVISORY COMMITTEE

(5) PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES OF SHAREHOLDERS' MEETINGS AND THE RULES AND PROCEDURES OF

MEETINGS OF THE BOARD

(6) GENERAL MANDATE TO ISSUE DEBT FINANCING INSTRUMENTS AND

(7) NOTICE OF ANNUAL GENERAL MEETING

A letter from the Board is set out on pages 5 to 31 of this circular.

A letter from the Independent Board Committee, containing its advice to the Independent Shareholders of the Company, is set out on pages 32 to 33 of this circular.

A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders of the Company, is set out on pages 34 to 48 of this circular.

A notice convening the AGM to be held at 10:00 a.m. on Tuesday, 24 June 2025 at The Conference Room C313, No. 30, Tianzhu Road, Airport Industrial Zone, Shunyi District, Beijing, the PRC, is set out on pages 208 to 211 of this circular. Whether or not you are able to attend the AGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible but in any event not less than 24 hours before the time appointed for convening the AGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

4 June 2025

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

中國國際航空股份有限公司

AIR CHINA LIMITED

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 00753)

To the Shareholders

Dear Sir or Madam,

(1)  CONTINUING CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION: THE CNACG FRAMEWORK AGREEMENT

(2)  CONTINUING CONNECTED TRANSACTION: THE NEW FRAMEWORK AGREEMENT

(3)  PROPOSED CHANGE OF AUDITORS

(4) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND THE ABOLISHMENT OF THE SUPERVISORY COMMITTEE

(5)  PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES OF SHAREHOLDERS' MEETINGS AND THE RULES AND PROCEDURES OF

MEETINGS OF THE BOARD

(6)  GENERAL MANDATE TO ISSUE DEBT FINANCING INSTRUMENTS AND

(7)  NOTICE OF ANNUAL GENERAL MEETING

I. INTRODUCTION

The AGM of the Company will be held at 10:00 a.m. on Tuesday, 24 June 2025.

The resolutions to be proposed at the AGM for the Shareholders' approval include: (1) the resolution on the 2024 work report of the Board; (2) the resolution on the 2024 work report of the Supervisory Committee; (3) the resolution on the financial reports for the year 2024; (4) the resolution on the profit distribution proposal for the year 2024; (5) the resolution on the unrecovered losses of the Company exceeding one-third of the total amount of its paid-up share capital; (6) the resolution on the renewal of the CNACG Framework Agreement between the Company and CNACG and the application for the annual transaction caps for 2026 to 2028; (7) the resolution on the entering into of the New Framework Agreement between the Company and Cathay Pacific and the application for the annual transaction caps for 2026 to 2028; (8) the resolution on the proposed change of auditors; (9) the resolution on the proposed amendments to the Articles of Association and the abolishment of the Supervisory Committee; (10) the resolution on the proposed amendments to the Rules and Procedures of Shareholders' Meetings; (11) the resolution on the proposed amendments to the Rules and Procedures of Meetings of the Board; and (12) the resolution on the grant of mandate to the Board of the Company to issue debt financing instruments.

The above resolutions no. (9) to no. (12) are special resolutions and the rest resolutions are ordinary resolutions.

The purpose of this circular is to provide you with all the information reasonably necessary to enable you to make an informed decision on voting in respect of the relevant resolutions at the AGM. For details of the above resolutions no. 1 to 5 and resolution no. 12, please refer to the section headed "VI. DETAILS OF OTHER RESOLUTIONS" in this circular. For details of the above resolutions no. 6 and 7, please refer to the section headed "II. CONTINUING CONNECTED TRANSACTIONS" in this circular. For details of the above resolution no. 8, please refer to the section headed "III. PROPOSED CHANGE OF AUDITORS" in this circular. For details of the above resolution no. 9, please refer to the section headed "IV. PROPOSED AMENDMENTS  TO  THE  ARTICLES  OF  ASSOCIATION AND  THE  ABOLISHMENT  OF  THE SUPERVISORY COMMITTEE" in this circular. For details of the above resolutions no. 10 and no. 11, please refer to the section headed "V. PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES  OF  SHAREHOLDERS'  MEETINGS  AND  THE  RULES  AND  PROCEDURES OF MEETINGS OF THE BOARD" in this circular.

II. CONTINUING CONNECTED TRANSACTIONS

1. The CNACG Transactions

Reference is made to the 2022 Circular in relation to, among other things, the CNACG Transactions. The current term of the CNACG Framework Agreement will expire on 31 December 2025. As the Company expects that the CNACG Transactions will continue to be conducted after 31 December 2025, on 28 May 2025, the Board resolved to renew the CNACG Framework Agreement for a term of three years commencing from 1 January 2026 to 31 December 2028, subject to Independent Shareholders' approval at the AGM.

The Company's principal business activity is air passenger, air cargo and airline-related services.

CNACG is a wholly-owned subsidiary of CNAHC, the controlling shareholder of the Company, and a substantial shareholder of the Company, directly holding approximately 11.18% of the Company's shares as at the Latest Practicable Date. CNACG is an investment holding company established in Hong Kong whose principal businesses include passenger terminal operation, cargo terminal operation, airport ground handling services, airline catering services, finance/operating lease, aircraft maintenance, property investment, logistics and other businesses conducted through its subsidiaries. As at the Latest Practicable Date, the State-owned Assets Supervision and Administration Commission of the State Council is the controlling shareholder and de facto controller of CNAHC. CNAHC primarily operates all the state-owned assets and state-owned equity interests invested by the State in CNAHC and its invested entities, aircraft leasing and aviation equipment and facilities maintenance businesses.

The CNACG Transactions contemplated under the CNACG Framework Agreement are as follows:

• Finance and operating lease services: the CNACG Group will provide finance and operating lease services in respect of, including but not limited to, aircraft, engines, simulators, aircraft-related materials, equipment and vehicles to the Group; the Group will provide finance and operating lease services in respect of, including but not limited to, equipment and vehicles to the CNACG Group.

Set out below are the differences between (i) engines, equipment and vehicle leasing services provided by the CNACG Group to the Group; and (ii) equipment and vehicle leasing services provided by the Group to the CNACG Group:

o The CNACG Group leases engines, equipment and vehicles to the Group through its specialised leasing subsidiary. These leasing services, offered under either finance lease or operating lease arrangements, typically have leasing terms of one year or longer. The leased equipment primarily includes airborne media equipment, baggage handling equipment and vehicles; and

o The Group provides equipment and vehicle leasing services to the CNACG Group on a selective basis, primarily consisting of catering trolleys leases based on the needs of CNACG Group from time to time and typically involving a leasing term of one year or longer.

• Ground support services and other services: including but not limited to the following transactions conducted between any member of the Group on the one hand and any member of the CNACG Group on the other hand: ground support services, aircraft maintenance services, aircraft repair services, property investment and management services, ticket and tourism services, logistics services, administrative management services, cleaning and washing services, resident security services, lounge supplies procurement services and aircraft material procurement services.

In particular, the services provided by the CNACG Group to the Group from time to time mainly include the ground support services, aircraft maintenance services, property investment and management services, ticket and tourism services, logistics services, administrative management services, cleaning and washing services and resident security services, while the services provided by the Group to the CNACG Group from time to time mainly include the aircraft repair services, lounge supplies procurement services and aircraft material procurement services.

The consideration of any specific CNACG Transactions shall be agreed on arm's length negotiations between the Group and the CNACG Group and on normal commercial terms, which shall be determined in accordance with the pricing policies set forth below on a case-by- case basis.

• Finance and operating lease services: the final transaction price will be determined on arm's length negotiations between both parties with reference to the prices for the same type of lease services offered by independent third parties and after taking into account certain factors. Such factors include purchasing price of the leasing subject, interest rate and arrangement fees (if any) (for finance lease), rental fee (for operating lease), the lease terms, the feature of the leasing subject and the comparable market rental prices. The final transaction price should not be higher than the transaction prices offered by at least two independent third parties on the same conditions (for services received by the Group); or the final transaction price should not be lower than the transaction prices offered by the Group to the independent third parties on the same conditions (for services provided by the Group).

• Ground support services and other services:

The pricing policies for ground support services and other services provided to or by the Group are set forth below:

(i) Follow the government pricing or guide price if it is available, including but not limited to the guidance from the Civil Aviation Administration of China (CAAC) and the International Air Transport Association regarding the prices for the ground support services and other terms, as well as the pricing standards for aeronautical information set by CAAC and the Air Traffic Management Bureau.

(ii) If no government pricing or guide price is available, first by making reference to the market prices offered by at least two independent third parties on the market for the same type of services, and after considering certain factors, the final transaction price shall be determined through arm's length negotiations between the parties. Such factors include service standards, scope, business volume and specific need of parties. If the service recipient's service requirements change, the transaction price may be adjusted appropriately through negotiation between both parties, based on the extent of changes in relevant costs, service quality or other factors.

(iii) If neither of the above cases is applicable, the price will be determined on the basis of cost plus reasonable profit. The costs are mainly based on the costs and expenses of the service provider, including human resource costs, facility, equipment and material costs. The reasonable profit margin will be determined mainly by reference to the historical average prices of similar products or services (where possible) of the relevant industry, and/ or the profit margin of comparable products and services disclosed by other listed companies. The profit margin of the CNACG Group shall not exceed 10%. The final transaction prices shall be determined on terms that are no less favourable to the Group than those provided by independent third parties to the Group or by the CNACG Group to independent third parties (for services received by the Group), or no more favourable than those provided by the Group to independent third parties (for services provided by the Group). The Group may generally learn about the historical average prices of reasonable profit margins for similar products or services in the relevant industry by making its own enquiries at the official websites of other listed companies. Besides, prior to entering into individual CNACG Transactions, the Group may have access to the terms of similar comparable transactions entered into by the CNACG Group with independent third parties for reference in determining the transaction price. While making reference to the profit margins of comparable products and services disclosed by other listed companies, the Group will seek to obtain as much comparable data as practicable, typically referencing at least two listed companies' relevant data where practicable.

The renewal of the CNACG Framework Agreement is subject to the approval of Independent Shareholders at the AGM. If approval of the Independent Shareholders is obtained, the CNACG Framework Agreement will be renewed for a term of three years commencing from 1 January 2026 to 31 December 2028, and may be renewed automatically for successive terms of three years each, subject to the fulfilment of requirements under the Hong Kong Listing Rules/the Shanghai Listing Rules and the approval procedures required under the Hong Kong Listing Rules/the Shanghai Listing Rules. Before expiry of the term of the CNACG Framework Agreement, the Board will re-assess the terms and conditions of the CNACG Framework Agreement, and the Company will re-comply with the relevant rules governing connected transactions under the Hong Kong Listing Rules/the Shanghai Listing Rules. During the term of the CNACG Framework Agreement, the agreement can be terminated upon the expiry on any 31 December by either party thereto by serving the other party a prior written notice of not less than three months.

Regarding the finance and operating lease services, by utilizing the leasing platform of the CNACG Group, the Group is able to secure equipment tailored to its specific needs, benefiting from lower financing costs, greater flexibility and reduced cash flow impact compared to direct purchases. This effectively supports the Group's production and operational needs. Simultaneously, the CNACG Group gains a stable revenue stream, creating a mutually beneficial and win-win relationship for both parties.

Regarding the ground support services and other services, the CNACG Group possesses extensive management experience and financial resources in airport ground services and logistics operations, which enables the CNACG Group to provide high-quality, efficient and convenient services to the Group, primarily covering ground operations in Hong Kong, as well as administrative support. The Group provides ground and other services to the CNACG Group, mainly focused on aviation materials procurement, albeit on a smaller scale. The collaboration between the CNACG Group and the Group ensures a mutually beneficial partnership, enhancing service quality and operational efficiency for both parties.

Overall, the transaction fosters a win-win relationship, with both parties leveraging their respective strengths to achieve cost efficiency, operational stability and mutual growth.

The table below sets out (i) the annual caps of the Group for the three years ended/ ending 31 December 2023, 2024 and 2025; and (ii) the actual historical amounts for each of the two years ended 31 December 2023 and 2024 and the estimated aggregate amounts payable for the year ending 31 December 2025:

Unit: RMB million

Reasons for the lower utilization rate of the historical annual caps

For the years ended 31 December 2023 and 2024, the utilization rates were calculated by comparing the actual historical amounts against the respective existing annual caps during each period. Looking ahead to 2025, the estimated utilization rates are based on the estimated amounts for the year ending 31 December 2025 against the existing annual cap for 2025. Specifically, the utilization rates for total value of right-of-use assets in relation to finance and operating leases entered into by the Group as lessee were 6% in 2023 and 12% in 2024, with an estimated utilization rate of 43% for 2025. For the annual rental fee for operating leases not accounted for as right-of-use assets provided by the CNACG Group, the utilization rates were 18% in 2023 and 13% in 2024, with an estimated 10% utilization rate for 2025. Amounts payable/paid to the CNACG Group by the Group for ground support services and other services showed utilization rates of 56% in 2023 and 55% in 2024, with the 2025 estimation at 48% of the existing annual cap. The estimated amounts for the year ending 31 December 2025 is based on the Group's plan to introduce 47 aircraft during 2025, of which no more than 50% will be financed through finance lease arrangements with the CNACG Group.

The discrepancy between the actual and estimated expenditure on finance leases is mainly due to delivery uncertainties by aircraft manufacturers, resulting in delays and a lower-than-planned number of aircraft introduced through finance leases. Additionally, the proceeds raised from the Company's non-public issuance of shares in 2022 and 2024 were primarily used for direct aircraft purchases, which further reduced the number of aircraft introduced via finance leases. The relatively low utilization rate of the historical annual caps for ground support services and other services is primarily due to flight volumes in Hong Kong not yet recovering to pre-pandemic levels, resulting in lower-than-expected utilization rate of the transaction annual caps for ground support services and other related services.

The table below sets out the proposed annual caps for the relevant transactions of the Group below for each of the three years ending 31 December 2026, 2027 and 2028, respectively:

Unit: RMB million

In arriving at the annual caps of the total value of right-of-use assets in relation to the finance and operating leases entered into by the Group as lessee above, the Company has considered the following factors:

• When estimating the total value of right-of-use assets in relation to aircraft under finance lease for the next three years, the Company has considered: (i) historical transaction amounts; (ii) the aircraft introduction plan of the Group and the assumption that 50% of aircraft to be introduced during 2026 to 2028 for which funding arrangements have not been finalised will be introduced through finance lease with the CNACG Group. The proposed annual cap for 2028 is lower than it for 2027 primarily because the proposed annual caps in respect of finance lease are derived based on the aircraft introduction plan of the Group. The aircraft introduction plan is driven by operational and strategic considerations which are formulated through comprehensive analysis of multiple operational factors including fleet composition optimisation, strategic market deployment and planned capacity allocation. It is estimated that more aircraft will be introduced in 2027 than in 2028, leading to a lower proposed annual cap for 2028 compared to it for 2027; (iii) given the expected lease term of 10 to 12 years for each aircraft under finance lease, the calculation of aircraft finance lease interest uses the People's Bank of China's over-five-year RMB Loan Prime Rate (LPR) of 3.6% as of 30 April 2025; (iv) based on the information currently available to the Group, it is anticipated that the CNACG Group will not charge arrangement fees for finance leases in the coming three years, and accordingly the arrangement fees have not been included in the annual cap estimates.

• When estimating the total value of right-of-use assets under operating leases for aircraft, engines and ground equipment over the next three years, the Company has considered: (i) in respect of aircraft operating leases, the estimation is primarily based on the Group's aircraft induction and retirement plans, and assuming no more than 10 aircraft will be introduced through operating leases with the CNACG Group for each of the years from 2026 to 2028. The lease rentals will be determined mainly by reference to prevailing market rates or professional appraisals subject to arm's length negotiations between the parties; (ii) in respect of the operating leases of engines and ground equipment, the estimation takes into account the current lease arrangements, the operational status of the Group's engines, simulators and equipment, along with anticipated commercial demand for operating lease in the next three years. Specifically, the Group plans to lease annually from the CNACG Group (a) one to two used engines and (b) 23 ground equipment, with lease terms typically ranging from 1 to 12 years.

• An exchange rate of RMB7.3 : USD1.0 is adopted for the calculation of the proposed annual caps.

• A reasonable buffer of 5% is reserved to accommodate unforeseen circumstances, ensuring flexibility in the financial planning process.

• Based on the above, the Company expected that for the three years ending 31 December 2028, the total annual rental fee payable by the Group to CNACG Group throughout the lease term for aircraft, engines and ground equipment under finance lease and operating lease entered into will not exceed RMB15 billion, RMB20 billion and RMB18 billion, respectively. By adopting the incremental borrowing rate of the Company as the discount rate (ranging from 2.24% to 2.74%) to discount such estimated future total rental fee, the total value of the right-of-use assets under the finance leases and operating leases entered into by the Group as the lessee for the three years ending 31 December 2028 will not exceed RMB14.8 billion, RMB19.5 billion and RMB17 billion, respectively.

In arriving at the above annual caps of annual rental fee payable by the Group to the CNACG Group in relation to the operating leases not accounted for as right-of-use assets, the Company has considered, among other things, the following factors:

• The historical transaction amounts and the assumption that certain operating leases of ground equipment may have a lease term of less than one year.

• The operation status of the Group's engines and equipment and the Group's commercial demand for operating leases in the following three years. The Group's annual rental fees paid for the lease with the CNACG Group that were not accounted for as right-of-use assets in the past were mainly related to some sporadic and temporary leases of engines and equipment, with an annual rental fee of approximately RMB25 million. As mentioned above, the Group may lease between one to two engines and 23 ground equipment from the CNACG Group in each of the three years from 2026 to 2028, respectively. As the Group has not yet determined whether to adopt long-term leases of over one year (in which case the leased assets will be accounted for as right-of-use assets) or short-term leases for these engines and equipment, the Company has also set annual caps for the rental fees of operating leases not accounted for as right-of-use assets to ensure that the transaction amounts are subject to corresponding annual caps regardless of the lease method. The Group will determine the lease method based on its actual business needs, taking into account the respective rental quotations for long-term and short-term leases and the financial impact on the Group. Based on the above, the Company estimates that, for the three years ending 31 December 2028, the annual rental fee of operating leases for engines and equipment not accounted for as right-of-use assets will not exceed RMB101 million, RMB180 million and RMB259 million, respectively.

• On the basis of the above estimated transaction amount and accounting for potential foreign exchange fluctuations, a reasonable buffer of 5% has further been included by rounding to the nearest integer to accommodate the Group's operating needs from time to time.

In arriving at the above annual caps of amount payable by the Group to the CNACG Group for ground support services and other services provided by the CNACG Group, the Company has considered, among other things, the following factors:

• Since 2023, the ground support and other services transaction volume has experienced growth, with the actual transaction amount reaching RMB440 million in 2024. Such growth reflects the Group's increasing demand for the CNACG Group's ground support and other services.

• Looking ahead, the estimated transaction scale for 2026 to 2028 is estimated to range between RMB500 million and RMB800 million. Such estimation is assuming an average annual growth rate of 7%, which is reached with reference to the civil aviation industry's average annual growth rate outlined in the "14th Five-Year Plan". Additionally, factors such as rising labor costs have been taken into account to ensure a realistic and comprehensive forecast.

• To account for potential uncertainties or unforeseen circumstances, a reasonable buffer of 5% has been included in the proposed annual caps for the amount payable by the Group to the CNACG Group for ground support services and other services provided by the CNACG Group, which ensures flexibility and preparedness for any unexpected changes in service demand or operational requirements.

The Group has adopted the following internal control procedures to ensure that the CNACG Transactions will be conducted on normal commercial terms, and in accordance with the CNACG Framework Agreement and the pricing policies of the Group:

• Before entering into individual CNACG Transactions, the Finance Department, the Legal Department, the Asset Management Department (which has a dedicated subdivision responsible for the management of connected transactions) and if applicable, certain other relevant departments of the Company will review the proposed terms for the individual CNACG Transactions and discuss with the relevant business department of the Group to ensure that such transactions are conducted on normal commercial terms and in compliance with the pricing policies of the Group before these relevant departments approve the finalized transaction agreements according to their authority within the Group.

• The Asset Management Department of the Company is responsible for overseeing the connected transactions of the Company. The Asset Management Department will monitor and collect detailed information on the CNACG Transactions on a regular basis, including but not limited to the implementation of pricing policies, term of agreement and actual transaction amount of each finance lease transaction, operating lease transaction and ground support services and other services to ensure that the transactions are conducted in accordance with the framework agreement. In addition, the Asset Management Department is responsible for monitoring and reviewing the balance amount of the annual cap for the CNACG Transactions on a monthly basis and if the annual cap for the CNACG Transactions is expected to be exceeded for a particular year, it will report to the management and take appropriate measures in accordance with the relevant requirements of the Hong Kong Listing Rules and/or the Shanghai Listing Rules.

• The Company's Internal Audit Department is responsible for performing annual assessment on the internal control procedures of the Group, including but not limited to the relevant information on the management of continuing connected transactions. In addition, the Internal Audit Department is responsible for compiling the annual internal control assessment report and submitting the report to the Board for examination and approval.

• The independent auditor of the Company and the independent non-executive Directors will conduct an annual review on the continuing connected transactions of the Group.

CNACG is a connected person of the Company as defined under the Hong Kong Listing Rules, and accordingly the CNACG Transactions constitute continuing connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules. As the highest applicable percentage ratio of the proposed annual cap in respect of the total value of right-of-use assets relating to the finance and operating leases entered into by the Group as lessee under the CNACG Transactions is, on an annual basis, higher than 5% but less than 25%, these transactions are therefore subject to the announcement, annual review, circular (including advice of independent financial adviser) and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules and the requirements under Chapter 14 of the Hong Kong Listing Rules applicable to discloseable transactions.

In respect of the operating lease not accounted for as right-of-use assets provided by the CNACG Group, as the highest applicable percentage ratio in respect of the proposed annual caps of the rental fee payable by the Group is, on an annual basis, higher than 0.1% but less than 5%, these transactions are subject to the announcement and annual review requirements under Chapter 14A of the Hong Kong Listing Rules but are exempt from the Independent Shareholders' approval requirement.

In respect of the ground support services and other services provided by CNACG Group, as the highest applicable percentage ratio in respect of the proposed annual caps of the amounts payable by the Group is, on an annual basis, higher than 0.1% but less than 5%, these transactions are subject to the announcement and annual review requirements under Chapter 14A of the Hong Kong Listing Rules but are exempt from the Independent Shareholders' approval requirement.

In respect of the finance and operating lease services provided by the Group to CNACG Group, for each of the three years ending 31 December 2026, 2027 and 2028, the aggregate amounts payable to the Group is expected to fall below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong Listing Rules. Therefore, such transactions will be exempt from the announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules.

In respect of the ground support services and other services provided by the Group to CNACG Group, for each of the three years ending 31 December 2026, 2027 and 2028, the aggregate amounts payable to the Group is expected to fall below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong Listing Rules. Therefore, such transactions will be exempt from the announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules.

The Board (including the independent non-executive Directors) considers that the terms and conditions of the CNACG Transactions are fair and reasonable. Such continuing connected transactions are on normal commercial terms or better and in the ordinary and usual course of business of the Group, and are in the interests of the Company and its Shareholders as a whole. The Board also considers that the annual caps for each of the three years ending 31 December 2026, 2027 and 2028 for the CNACG Transactions are fair and reasonable.

Mr. Ma Chongxian, Mr. Wang Mingyuan, Mr. Cui Xiaofeng and Mr. Xiao Peng, being the Directors of the Company also holding directorship in CNAHC, are considered to have material interests in the CNACG Transactions and therefore have abstained from voting in the relevant Board resolutions in respect of the CNACG Transactions. Save as disclosed above, none of the Directors have a material interest in the CNACG Transactions and hence no other Director is required to abstain from voting in the relevant Board resolutions.

As CNACG is controlled by CNAHC, the controlling shareholder of the Company, CNACG is considered as a related party of the Company according to the Shanghai Listing Rules. As a result, the transactions between the Group and CNACG Group constitute related party transactions under the Shanghai Listing Rules. According to the Shanghai Listing Rules, the transaction amounts of the proposed annual caps of the CNACG Transactions exceed 5% of the latest audited net assets of the Company, and therefore shall be disclosed in a timely manner and be submitted to the general meeting of the Company for consideration and approval by unrelated shareholders of the Company (i.e. the Independent Shareholders).

2. The Cathay Transactions

Reference is made to the joint announcements dated 26 June 2008, 10 September 2010, 26 September 2013, 30 August 2016, 28 August 2019 and 30 August 2022 issued by the Company and Cathay Pacific in connection with the Framework Agreement entered into between the Company and Cathay Pacific on 26 June 2008. The Framework Agreement was renewed on 1 October 2022 for a term of three years from 1 January 2023 to 31 December 2025. As the parties expect that certain transactions contemplated under the Framework Agreement will continue after 31 December 2025, the Company and Cathay Pacific entered into the New Framework Agreement on 28 May 2025. The New Framework Agreement is conditional upon, among others, approval being given by the Independent Shareholders at the AGM. If such condition is satisfied, the New Framework Agreement will come into effect on 1 January 2026.

The Framework Agreement provided the framework governing the execution, renewal and extension of the relevant agreements between members of the Group on the one hand and members of Cathay Pacific Group on the other hand. Historically, transactions involving 30%- controlled Corporations of either the Company or Cathay Pacific were de minimis in value, and therefore were not included in the Framework Agreement. However, in light of the evolving business development between the Group (including the Company's 30%-controlled Corporations) and Cathay Pacific Group (including Cathay Pacific's 30%-controlled Corporations), the volume of transactions are expected to grow substantially.

To accommodate such anticipated expansion and ensure efficient governance, the New Framework Agreement extends coverage to include each party's 30%-controlled Corporations. The expanded scope will facilitate seamless collaboration. By broadening the framework to cover these transactions, the New Framework Agreement enhances operational flexibility, improves management efficiency and supports the deepening partnership between the Company and Cathay Pacific.

As Cathay Pacific is a substantial shareholder and therefore a connected person of the Company, transactions between members of the Group on the one hand and members of Cathay Pacific Group and Cathay Pacific's 30%-controlled Corporations on the other hand constitute continuing connected transactions for the Company under Rule 14A.31 of the Hong Kong Listing Rules and are subject to reporting, annual review and announcement requirements under Chapter 14A of the Hong Kong Listing Rules.

The transactions contemplated under the New Framework Agreement include those arising from interline arrangements, code sharing arrangements, joint operating arrangements, aircraft leasing, frequent flyer programmes, the provision of airline catering, ground support and engineering services, inbound/outbound cargo handling services and other services agreed to be provided and other transactions agreed to be undertaken under the New Framework Agreement.

Except for the expanded scope under the New Framework Agreement and the corresponding changes in pricing policies thereunder, other material terms of the Framework Agreement remain unchanged.

The New Framework Agreement will be renewed automatically for successive periods of three years after the three years term ending on 31 December 2028, subject to each party's compliance with relevant requirements, including obtaining board and/or shareholders' approvals (if applicable), in accordance with applicable laws, rules and regulations (including the listing rules of the stock exchange(s) where the parties' shares are respectively listed). Either party may terminate the agreement by giving the other party notice of termination of not less than three months, expiring on any 31st December.

The following table outlines the relevant pricing terms and policies for the respective transactions contemplated under the New Framework Agreement.

The pricing terms and policies as set out above have been, and any variation of it will be, negotiated between Cathay Pacific and the Company at arm's length. If comparable market prices for the relevant products and services as described in the above are available, the parties agree to obtain, verify and compare quotations and terms from at least two independent parties to ensure the fairness and reasonableness of their terms.

For the purpose of setting the annual caps in respect of the continuing connected transactions of the Company, the Cathay Transactions contemplated under the New Framework Agreement involve, among other things, transactions between the Group on the one hand and Cathay Pacific Group and Cathay Pacific's 30%-controlled Corporations on the other hand, which constitute continuing connected transactions for the Company under Rule 14A.31 of the Hong Kong Listing Rules.

The table below sets out the historical payments and the corresponding annual caps for the relevant continuing connected transactions of the Company contemplated under the New Framework Agreement.

Notes: 1. Reference is made to the joint announcement made on 30 August 2022 issued by the Company and Cathay Pacific. The prescribed 2025 annual caps for (i) payments made by the Group to Cathay Pacific Group, and (ii) payments made by Cathay Pacific Group to the Group, in each case, excluding transactions involving Cathay Pacific's 30%-controlled Corporations is HK$900 million respectively.

2. For the avoidance of doubt, for transactions between the Group and Cathay Pacific's 30%-controlled Corporations, the actual transaction amount for the period between 1 January 2025 and 30 April 2025 was and the expected transaction amount for the year ending 31 December 2025 will be within the de minimis threshold under the Hong Kong Listing Rules.

The following key factors are considered in determining the above annual caps set for continuing connected transactions under the New Framework Agreement:

(1) the historical transaction volume and the estimated transaction amounts for 2025;

(2) the operational needs of both the Group and Cathay Pacific Group, including amongst other things, the projections of each party's fleet sizes, the delivery schedules of new aircraft, the anticipated annual growth in flights scheduled for Hong Kong;

(3) the expanded scope under the New Framework Agreement to include Cathay Pacific's 30%-controlled Corporations, as well as the potential increase in number of subsidiaries of both parties over time; and

(4) foreign exchange fluctuations and a buffer of 5% have been incorporated to account for potential unplanned increases in aircraft maintenance services and other unforeseen factors, allowing for sufficient flexibility to accommodate future developments.

The cooperation between the Group and Cathay Pacific Group is expected to continue to further the development of Beijing Capital International Airport and Hong Kong International Airport as gateways to and hubs for Mainland China and Hong Kong and will assist the Group and Cathay Pacific Group in their efforts to optimise the allocation of operating resources.

Cathay Pacific, by virtue of its 15.09% shareholding in the Company, is a substantial shareholder and therefore a connected person of the Company under the Hong Kong Listing Rules.

As the highest of the applicable percentage ratios in respect of the annual caps applicable to each of the (i) payments made by the Group to Cathay Pacific Group and/or Cathay Pacific's 30%-controlled Corporations, and (ii) payments received by the Group from Cathay Pacific Group and/or Cathay Pacific's 30%-controlled Corporation is, on an annual basis, more than 0.1% but less than 5%, such transactions are subject to the announcement and annual review requirements but are exempt from the shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules.

The Directors, including the independent non-executive Directors, consider that the terms of the New Framework Agreement are fair and reasonable and that the New Framework Agreement is (i) on normal commercial terms or better and in the ordinary and usual course of business of the Group; and (ii) in the interests of the Company and its shareholders as a whole.

Mr. Ma Chongxian, Mr. Wang Mingyuan and Mr. Patrick Healy, being the Directors of the Company also holding directorship in Cathay Pacific, are considered to have material interests in the transactions contemplated under the New Framework Agreement and therefore have abstained from voting in the relevant Board resolution in respect of the continuing connected transactions. Save as disclosed above, none of the Directors have a material interest in the transactions contemplated under the New Framework Agreement and hence no other Director is required to abstain from voting in the relevant Board resolution.

As Cathay Pacific is a substantial shareholder of the Company, Cathay Pacific is considered as a related party of the Company according to Shanghai Listing Rules. As a result, the transactions between the Group and Cathay Pacific Group constitute related party transactions of the Company under the Shanghai Listing Rules. According to Shanghai Listing Rules, the transaction amounts of the proposed annual caps exceed 5% of the latest audited net assets of the Company, and therefore shall be disclosed in a timely manner and be submitted to the general meeting of the Company for consideration and approval by unrelated shareholders of the Company (i.e. the Independent Shareholders).

Therefore, although the transactions contemplated under the New Framework Agreement are exempted from Independent Shareholders' approval under the Hong Kong Listing Rules, they are required to be approved by the Independent Shareholders under the Shanghai Listing Rules.

In order to ensure that the continuing connected transactions between Cathay Pacific Group and the Group are being conducted in a fair and reasonable manner, the Company has adopted the following internal control procedures:

(i) the Company conducts regular reviews to ensure that the transaction amounts of the continuing connected transactions are within the relevant annual caps;

(ii) the Company's independent non-executive Directors will review the Group's continuing connected transactions on an annual basis as required under Rule 14A.55 of the Hong Kong Listing Rules and confirm in its annual report whether the continuing connected transactions have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) the terms of the agreements governing the relevant transactions are fair and reasonable and in the interests of the Company and its shareholders as a whole; and

(iii) for compliance with Rule 14A.56 of the Hong Kong Listing Rules, the Company will also engage its external auditors to conduct an annual review of the respective continuing connected transactions of the Company to ensure that, among others, the transactions (a) have been approved by the Directors, (b) were, in all material respects, in accordance with the pricing policies of the Company (including, but not limited to, those set out in the section "Pricing Terms and Policies" in this circular) if the transactions involve the provision of goods or services by the Company, (c) were conducted, in all material respects, in accordance with the terms of the relevant agreements, and (d) have not exceeded the relevant annual caps.

III. PROPOSED CHANGE OF AUDITORS

Reference is made to the announcement of the Company dated 27 March 2025.

Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP (collectively, "Deloitte") have been providing audit services to the Company for eight consecutive years. In accordance with the relevant provisions of the Measures for the Administration of Selection and Engagement of Accounting Firms by State-owned Enterprises and Listed Companies 《( 國有企業、上市公司選聘會計師事務所管理辦法》), following the procurement process and based on the results thereof, the Board has resolved on 27 March 2025, with the recommendation from the Audit and Risk Management Committee (the Supervision Committee) of the Board, to propose to appoint KPMG Huazhen LLP as the Company's domestic auditor and internal control auditor for 2025 and KPMG as the Company's international auditor for 2025 (the "Proposed Appointment"). The estimated annual audit fees for the year 2025 amount to RMB11.149 million, of which the fees for audit and review of financial reports amount to RMB10.149 million and the audit fees for internal control amount to RMB1.00 million, remaining basically unchanged from the previous year's annual audit fees of RMB11.242 million.

The Proposed Appointment is subject to the approval of the Shareholders at the AGM. Upon approval at the AGM, Deloitte will cease to be the auditors of the Company.

Deloitte has confirmed that there were no matters relating to their retirement as auditors of the Company that need to be brought to the attention of the Shareholders. The Company also confirmed that there was no disagreement between the Company and Deloitte regarding work arrangements, fees or opinions.

The Audit and Risk Management Committee (the Supervision Committee), having reviewed the credentials of KPMG and KPMG Huazhen LLP, including their basic information, personnel details, professional competence, investor protection capability, integrity status and independence, considers that they can meet the requirements for providing audit services to the Company, and the reasons for changing the auditors are sufficient and appropriate.

The Proposed Appointment will be put forward for approval by the Shareholders by way of an ordinary resolution at the AGM.

IV. PROPOSED  AMENDMENTS  TO  THE  ARTICLES  OF  ASSOCIATION  AND  THE ABOLISHMENT OF THE SUPERVISORY COMMITTEE

Reference is made to the announcement of the Company dated 28 May 2025 in relation to, among other things, the proposed amendments to the Articles of Association.

In accordance with provisions of the Company Law of the People's Republic of China (the "Company Law"), the Guidelines for the Articles of Association of Listed Companies, the Rules for Shareholders' Meetings of Listed Companies and other laws, regulations and normative documents and regulatory requirements, and in light of the actual operational and management needs of the Company, the Board resolved on 28 May 2025 to propose amendments to the Articles of Association, and to make corresponding amendments to the Rules and Procedures of Shareholders' Meetings and the Rules and Procedures of Meetings of the Board. Upon completion of the amendments to the Articles of Association, the Rules and Procedures of Shareholders' Meetings and the Rules and Procedures of Meetings of the Board, the Company will no longer maintain the Supervisory Committee and supervisor positions, with the Audit and Risk Management Committee (the Supervision Committee) under the Board exercising the functions and powers of the Supervisory Committee as stipulated under the Company Law. The Rules and Procedures of the Supervisory Committee will be repealed accordingly.

The main amendments include: (1) the abolishment of the Supervisory Committee and supervisor positions, with the Audit and Risk Management Committee (the Supervision Committee) excising the original functions and powers of the Supervisory Committee. The Rules and Procedures of the Supervisory Committee will be repealed accordingly; (2) adjustments of certain functions and powers of the shareholders' meeting and the Board; (3) addition of a new chapter on special committees of the Board to set forth the composition and authorities of the five existing special committees of the Board, and deletion of the chapter on the Supervisory Committee; (4) enhancement of shareholders' rights, which the eligibility threshold for submitting proposals to the shareholders' meeting of the Company is changed from shareholders holding, individually or collectively, 3% or more of the Company's shares to those holding, individually or collectively, 1% or more of the Company's shares; adjustments are made to the content and exercise methods of shareholders' rights to information, further strengthening protections for minority shareholders; and (5) updates or refinements to other provisions of the Articles of Association in accordance with the latest laws and regulations and normative documents.

The details of the proposed amendments to the Articles of Association is set out in Appendix IV to this circular.

The proposed amendments to the Articles of Association will be put forward for approval by the Shareholders by way of a special resolution at the AGM.

V. PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES OF SHAREHOLDERS' MEETINGS AND THE RULES AND PROCEDURES OF MEETINGS OF THE BOARD

On 28 May 2025, the Board also resolved to propose to the Shareholders certain amendments to the Rules and Procedures of Shareholders' Meetings and the Rules and Procedures of Meetings of the Board, so as to, among other things, align with the proposed amendments to the Articles of Association.

The details of the proposed amendments to the Rules and Procedures of Shareholders' Meetings and the Rules and Procedures of Meetings of the Board are set out in Appendix V and Appendix VI to this circular, respectively.

The proposed amendments to the Rules and Procedures of Shareholders' Meetings and the Rules and Procedures of Meetings of the Board will be put forward for approval by the Shareholders by way of special resolutions at the AGM.

VI. DETAILS OF OTHER RESOLUTIONS

(I) Resolution on the 2024 work report of the Board

For the full text of the 2024 work report of the Board, please refer to Appendix II to this circular.

(II) Resolution on the 2024 work report of the Supervisory Committee

For the full text of the 2024 work report of the Supervisory Committee, please refer to Appendix III to this circular.

(III) Resolution on the financial reports for the year 2024

For the full text of the financial reports for the year 2024 prepared under the PRC Accounting Standards and the IFRS Accounting Standards, please refer to relevant disclosures made by the Company on the website of the Shanghai Stock Exchange and the HKEXnews website of the Hong Kong Stock Exchange, respectively.

(IV) Resolution on the profit distribution proposal for the year 2024

According to the audited financial statements of the Company prepared in accordance with the PRC Accounting Standards and the IFRS Accounting Standards, the Company recorded negative profits available for distribution to Shareholders in 2024. As considered and approved by the second meeting of the seventh session of the Board, the Company proposed not to make profit distribution for the year of 2024.

(V) Resolution on the unrecovered losses of the Company exceeding one-third of the total amount of its paid-up share capital

Pursuant to the relevant requirements of the Company Law and the Articles of Association, under circumstances that the amount of the unrecovered losses of the Company exceeds one-third of the total paid-up share capital, it shall be subject to consideration at the general meeting of the Shareholders.

According to the audit report issued by Deloitte Touche Tohmatsu Certified Public Accountants LLP, the net loss attributable to shareholders of parent company of the Company in 2024 was RMB237 million. As of the end of 2024, the accumulated unrecovered losses of the Company was RMB30.744 billion and the share capital of the Company was RMB17.448 billion. The amount of the unrecovered losses of the Company exceeded one-third of the total paid-up share capital.

(VI) Resolution on the grant of general mandate to the Board to issue debt financing instruments

Given the general mandate to issue debt financing instruments granted by Shareholders at the last annual general meeting of the Company will lapse at the conclusion of the AGM, a special resolution will be proposed at the AGM to grant a general mandate to the Board to issue the debt financing instruments (the "Debt Financing Instrument Issue Mandate").

In order to meet the Company's production and operation needs, according to the 2025 financing plan of the Company, the Company shall issue the Debt Financing Instruments (as defined below) at appropriate time. To grasp the favourable opportunity in the market, improve flexibility and efficiency of financing, the application is now been submitted by the Board at the general meeting of Shareholders of the Company to obtain general and unconditional mandate from the general meeting, under which the Board shall determine to issue debt financing instruments in one or multiple tranches within the cap amount of bond issuance under the requirements of applicable laws (the "Issuance"). If the Board has resolved to issue debt financing instruments according to the authorisation obtained at the general meeting(s), the authorisation in relation to the issuance of such debt financing instruments shall continue to be valid and extended to the term of authorisation of the Issuance accordingly. Particulars regarding the Issuance are as follows:

The relevant debt financing instruments include, but not limited to, ultra-short-term commercial papers, short- term commercial papers, mid-term notes, corporate bonds, domestic targeted debt financing instruments, overseas debt financing instruments and overseas bonds/ notes denominated in RMB or foreign currencies ("Debt Financing Instruments").

3. Authorization to the Board

The Board proposed to the shareholders of the Company at the AGM to authorize the Board, generally and unconditionally, to deal with the following in accordance with the specific needs of the Company and other market conditions:

(1) to determine the issuer, issue size, type, specific instruments, detailed terms, conditions and other matters relating to the Issuance (including, but not limited to, the specific issue size, actual principal amount, currency, issue price, interest rate or mechanism for determining the interest rate, issue place, issue timing, term, whether or not to issue in multiple tranches and number of tranches, whether or not to set put-back or redemption terms, credit rating, guarantee, repayment term, detailed fund-raising arrangements within the scope of use approved by the Shareholders' meeting, detailed placing arrangements, underwriting arrangements and all other matters relating to the Issuance).

(2) to carry out all necessary and ancillary actions and procedures relating to the Issuance (including, but not limited to, engaging underwriters, lawyers, auditors, rating agencies, financial advisers and other intermediary institutions, handling all approval, registration and filing procedures with the relevant regulatory authorities in connection with the Issuance on behalf of the Company, executing all necessary legal documents in connection with the Issuance, selecting bonds trustee manager for the Issuance, formulating rules for the bondholders' meeting and handling any other matters relating to the issuance and trading).

(3) to approve and confirm any action or procedure relating to the Issuance as mentioned above already taken by the Company.

(4) to make adjustments to the relevant matters such as the specific proposals for the Issuance in accordance with the comments from the regulatory authorities or the prevailing market conditions within the authority granted at the general meeting of the Company, except where a new vote at a general meeting of the Company is required by relevant laws and regulations and the Articles of Association.

(5) to determine and handle relevant matters relating to the listing of the issued Debt Financing Instruments upon the completion of the issuance.

(6) in the case of issuance of corporate debt financing instruments, during the term of the corporate debt financing instruments, to determine not to distribute profits to the shareholders to safeguard repayment of debts as required under the relevant laws and regulations in the event that the Company expects to, or does fail to pay the principal and interests as they fall due.

(7) to approve, execute and dispatch any announcements or circulars relating to the Issuance and make any related disclosure in accordance with the listing rules of the relevant jurisdictions where the shares of the Company are listed.

The Board also proposed to the shareholders at the AGM to authorize the Board to further delegate the authorizations set forth in paragraph (1) to (6) above to the president and/ or the general accountant of the Company and to authorize the Board to further delegate the authorization set forth in paragraph (7) above to the secretary of the Board while obtaining the authorization at the AGM.

VII. AGM

The Company will convene the AGM at The Conference Room C313, No. 30, Tianzhu Road, Airport Industrial Zone, Shunyi District, Beijing, the PRC at 10:00 a.m. on Tuesday, 24 June 2025 to consider and, if thought fit, approve, among other things, the aforesaid matters. Votes on the resolutions to be considered at the AGM shall be taken by way of poll. A form of proxy is also enclosed herein, and published on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (www.airchina.com.cn). The notice of AGM is reproduced in this circular.

In respect of the CNACG Transactions, pursuant to Rule 14A.36 of the Hong Kong Listing Rules, any Shareholder with a material interest in the CNACG Transactions is required to abstain from voting on the relevant resolutions at the AGM. As at the Latest Practicable Date, CNACG is a wholly-owned subsidiary of CNAHC. Therefore, CNAHC and CNACG are required to abstain from voting on the resolution in respect of the CNACG Transactions at the AGM. As at the Latest Practicable Date, CNAHC and CNACG, in aggregate, held 9,370,724,929 shares of the Company, representing approximately 53.71% of the issued share capital of the Company, controlled or were entitled to control over the voting right in respect of the shares held by them in the Company. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, save as disclosed above, no Shareholder has a material interest in the resolution in respect of the CNACG Transactions or should be required to abstain from voting on the relevant resolution at the AGM.

In respect of the transactions contemplated under the New Framework Agreement, pursuant to Rule 14A.36 of the Hong Kong Listing Rules, any Shareholder with a material interest in such transactions is required to abstain from voting on the relevant resolution at the AGM. As at the Latest Practicable Date, Cathay Pacific is a substantial shareholder of the Company. Therefore, Cathay Pacific and its associates are required to abstain from voting on the resolution in respect of the transactions contemplated under the New Framework Agreement. As at the Latest Practicable Date, Cathay Pacific and its associates, in aggregate, held 2,633,725,455 shares of the Company, representing approximately 15.09% of the issued share capital of the Company, and controlled or were entitled to control over the voting right in respect of the shares held by them in the Company. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, save as disclosed above, no Shareholder has a material interest in the resolution in respect of the transactions contemplated under the New Framework Agreement or should be required to abstain from voting on the relevant resolution at the AGM.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, save as the above Shareholders, no Shareholder has a material interest in the resolutions set out in the notice of the AGM or should be required to abstain from voting on the relevant resolutions at the AGM.

The register of members of H shares will be closed from Thursday, 19 June 2025 to Tuesday, 24 June 2025 (both days inclusive), during which no transfer of H shares will be effected in order to determine the list of holders of H shares of the Company who will be entitled to attend and vote at the AGM. H Shareholders of the Company whose names appear on the H share register of members of the Company at the close of business on Wednesday, 18 June 2025 are entitled to attend the AGM after completing the registration procedures. In order to qualify for attendance at the AGM, all the transfer documents must be lodged with the Company's H Share registrar, Computershare Hong Kong Investor Services Limited, by 4:30 p.m. on Wednesday, 18 June 2025.

Whether or not you intend to attend the AGM, you are requested to complete and return the form of proxy in accordance with the instruction printed thereon as soon as practicable but in any event not less than 24 hours before the time appointed for convening the AGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or at any adjourned meeting thereof should you so wish.

VIII. RECOMMENDATION

The Board considers that the matters to be proposed to the Shareholders for voting at the AGM are in the interests of the Company and its shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of all the resolutions at the AGM.

IX. ADDITIONAL INFORMATION

Your attention is drawn to the letter from the Independent Board Committee as set out in this circular which contains its recommendation to the Independent Shareholders as to the voting at the AGM regarding the Non-exempt Transactions.

Your attention is also drawn to the letter from the Independent Financial Adviser as set out in this circular, which contains, among others, its advice to the Independent Board Committee and the Independent Shareholders in relation to the Non-exempt Transactions as well as the principal factors and reasons considered by it in concluding its advice.

Your attention is also drawn to the additional information set out in Appendices to this circular.

By order of the Board Air China Limited

Ma Chongxian Chairman

Beijing, the PRC

中國國際航空股份有限公司

AIR CHINA LIMITED

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 00753)

Independent Board Committee:

Mr. Xu Niansha Mr. He Yun

Ms. Winnie Tam Wan-chi Mr. Gao Chunlei

4 June 2025

To the Independent Shareholders of the Company

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 4 June 2025 issued by the Company to its Shareholders (the "Circular") of which this letter forms a part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

On 28 May 2025, the Board approved the renewal of the CNACG Framework Agreement in respect of the CNACG Transactions and the proposed annual caps of the transactions contemplated thereunder for the three years ending 31 December 2028 as set out in the Circular. The Non-exempt Transactions are subject to the announcement, annual review, circular (including advice of independent financial adviser) and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules.

The terms and the reasons for the renewed CNACG Framework Agreement are summarised in the Letter from the Board of the Circular.

We have been appointed to form the Independent Board Committee to make a recommendation to the Independent Shareholders as to whether the Non-exempt Transactions are fair and reasonable and whether such transactions are in the interests of the Company and the Shareholders as a whole. BaoQiao Partners Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

As your Independent Board Committee, we have discussed with the management of the Company the reasons for the Non-exempt Transactions, their terms and the basis upon which the terms have been determined. We have also considered the key factors taken into account by the Independent Financial Adviser in arriving at its opinion regarding the above mentioned transactions and their proposed annual caps as set out in the Letter from the Independent Financial Adviser of the Circular, which we urge you to read carefully.

The Independent Board Committee, after taking into account, among other things, the advice of the Independent Financial Adviser, considers that the Non-exempt Transactions are conducted on normal commercial terms or on terms no less favourable than those available to independent third parties and are entered into in the ordinary and usual course of business of the Group, are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and that the proposed annual caps under those transactions are also fair and reasonable. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favor of the relevant ordinary resolution as set out in the notice of the AGM.

The following is the full text of the letter of advice from BaoQiao Partners Capital Limited to the Independent Board Committee and the Independent Shareholders in respect of Non-exempt Transactions, which has been prepared for the purpose of inclusion in this circular.

Room C01, 26/F, United Centre,

95 Queensway, Admiralty, Hong Kong

4 June 2025

To the Independent Board Committee and the Independent Shareholders of Air China Limited

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the continuing connected transactions relating to the finance and operating lease services entered into by the Group as lessee under the CNACG Transactions (the "Non-exempt Transactions") under the CNACG Framework Agreement, details of which are set out in the Letter from the Board ("Letter from the Board") contained in the circular (the "Circular") issued by the Company to the Shareholders dated 4 June 2025. Terms used herein shall have the same meanings as those defined in the Circular unless the context requires otherwise.

As disclosed in the Letter from the Board, the current term of the CNACG Framework Agreement will expire on 31 December 2025. As the Company expects that the CNACG Transactions (which include the Non-exempt Transactions) will continue to be conducted after 31 December 2025, on 28 May 2025, the Board resolved to renew the CNACG Framework Agreement for a term of three years commencing from 1 January 2026 to 31 December 2028, subject to Independent Shareholders' approval at the AGM.

As CNACG is a substantial shareholder of the Company and a wholly-owned subsidiary of CNAHC, the controlling shareholder of the Company, CNACG is a connected person of the Company as defined under the Chapter 14A of the Hong Kong Listing Rules, and accordingly the renewal of the CNACG Framework Agreement and the CNACG Transactions (which include the Non-exempt Transactions) contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules.

As the highest applicable percentage ratio in respect of the proposed annual caps of the Non-exempt Transactions provided by the CNACG Group under the CNACG Transactions is, on an annual basis, higher than 5% but less than 25%, these transactions are therefore subject to the announcement, annual review, circular (including advice of independent financial adviser) and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules.

OUR INDEPENDENCE

In the last two years, prior to the Latest Practicable Date, BaoQiao Partners was appointed as the independent financial adviser by the Company (i) to advise of the Board in respect of the opinion pursuant to Rule 14A.52 of Hong Kong Listing Rules, as set out in (a) the circular of the Company dated 3 May 2023; and (b) the announcement and circular of the Company dated 30 October 2024 and 18 November 2024 respectively; (ii) to advise the independent board committee and independent shareholders of the Company in respect of the disclosable transaction and continuing connected transactions of the Company and the proposed revision of annual cap and entering into financial service agreements, as set out in the circular of the Company dated 3 May 2023; (iii) to advise the independent board committee and the independent shareholders of the Company in respect of the connected transaction involving the proposed issuance of A Shares and H Shares to specific investor, as set out in the circular of the Company dated 9 January 2024; and (iv) to advise the independent board committee and independent shareholders of the Company in respect of the continuing connected transactions of the Group's passenger aircraft cargo businesses, as set out in the circular of the Company dated 18 November 2024.

As at the Latest Practicable Date, we do not have any relationship with, or have any interest in, the Company, CNACG, and their respective associates that could reasonably be regarded as relevant to our independence. Apart from the normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser, no other arrangement exists whereby we had received or will receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence. As such, we consider that we are independent pursuant to Rule 13.84 of the Hong Kong Listing Rules.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations provided to us by the Company, the Directors and the management of the Company (collectively, the "Management"). We have reviewed, among others, the annual reports of the Company for each of the years ended 31 December 2022 ("FY2022") (the "2022 Annual Report"), 31 December 2023 ("FY2023") (the "2023 Annual Report") and 31 December 2024 ("FY2024") (the "2024 Annual Report"), the CNACG Framework Agreement, certain corporate and financial information of the Group and the CNACG Group, and the information set out in the announcement of the Company dated 28 May 2025 in respect of the Non-exempt Transactions (the "Announcement") and the Circular. We have assumed that all information and representations that have been provided by the Management, for which they are solely and wholly responsible, are true, accurate and complete in all material respects and not misleading or deceptive at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and representations made by the Management in the Circular and/or discussed with/ provided to us were reasonably made after due enquiries and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers, the Management, which have been provided to us.

The Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs, financial condition and future prospects of the Company, its subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the entering into the CNACG Framework Agreement. Our opinion is necessarily based on financial, economic, market and other conditions in effect, and the facts, information, representations and opinions made available to us, at the Latest Practicable Date.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with the Non-exempt Transactions under the CNACG Framework Agreement, and this letter, except for its inclusion in the Circular as required under the Hong Kong Listing Rules, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In giving our recommendation to the Independent Board Committee and the Independent Shareholders with regard to the Non-exempt Transactions, we have taken into consideration the following factors and reasons:

1. Background Information of the Parties

The Company is incorporated in the People's Republic of China with limited liability, the shares of which have been listed on the Main Board of the Hong Kong Stock Exchange since 15 December 2004. The Group is principally engaged in the provision of airline and airline related services, including aircraft engineering services and airport ground handling services.

According to the 2024 Annual Report, the Group reported a revenue of approximately RMB166,698.88 million, representing a year-on-year increase of approximately 18.14% or RMB25,598.65 million which was mainly attributable to the increase in both the Group's air passenger revenue and air cargo and mail revenue for FY2024 by around 16.3% or RMB21,272.11 million and 78.01% or RMB3,249.11 million respectively as compared with that for FY2023. In line with the increase in revenue, loss for the year attributable to equity shareholders of the Company decreased from approximately RMB1,038.41 million for FY2023 to loss of approximately RMB232.56 million for FY2024.

Based on the 2024 Annual Report, the Group introduced 36 aircraft and phased out 11 aircraft during FY2024. As at 31 December 2024, the Group operated a fleet of 930 aircraft in total with an average age of 9.90 years, of which an aggregate of 524 aircraft were acquired under finance and operating leases.

As disclosed in the Letter from the Board, CNACG is a substantial shareholder of the Company and a wholly-owned subsidiary of CNAHC, the controlling shareholder of the Company. CNACG is an investment holding company established in Hong Kong whose principal businesses include passenger terminal operation, cargo terminal operation, airport ground handling services, airline catering services, finance/operating lease, aircraft maintenance, property investment, logistics and other businesses conducted through its subsidiaries.

The CNACG Group has been providing a wide range of aircraft related services to the Group since 2008, including but not limited to, ground support services, aircraft repair and maintenance services, administrative management services as well as finance lease and operating lease services in respect of, among other things, aircrafts, engine, simulator, equipment and vehicles.

2. Overview of Aviation Industry

According to the press releases published by the International Air Transport Association ("IATA") on 29 January 2025 and 30 January 2025, both air passenger traffic (measured in revenue passenger kilometers) and air cargo traffic (measured in cargo tonne-kilometers) showed strong performance in 2024. Globally, full year 2024 air passenger traffic rose 10.4% compared to 2023, which was 3.8% above the pre-pandemic (2019) level. In respect of air cargo traffic, global full-year demand in 2024 rose 11.3% compared to 2023. Both air passenger and cargo demand continue to grow in 2025. Based on the press releases published by IATA on 27 February 2025, the revenue passenger kilometers (RPKs) were up 10.0% compared to January 2024 and the cargo tonne-kilometers (CTKs) also rose by 3.2% compared to January 2024 level.

In addition, according to the financial outlook for the global airline industry in 2025 published by IATA on 10 December 2024, overall strengthening of profitability is expected in 2025 and both passenger numbers and cargo volumes are expected to increase by 6.7% and 5.8% respectively compared to 2024.

China also witnessed growth in demand for air transport in 2024. According to the 2024 Statistical Bulletin (the "CAAC Bulletin") on Civil Transport Airport Operations published by the Civil Aviation Administration of China ("CAAC"), China's full year air passenger traffic rose 15.9% versus 2023, and was 8% above the pre-pandemic (2019) level, of which domestic traffic rose 12.2% versus 2023 (12.2 % above the 2019 level), while international traffic has shown a recovery trend and rose 109.8% versus 2023 and was at 71.2% of 2019 level.

3. Reasons for and benefits of the Non-exempt Transactions

As advised by the Management and as disclosed in the Letter from the Board, we note that the Company has developed its cooperation relationship with CNACG since 2008. In light of the long- established cooperation relationship between the Company and the CNACG Group as well as the CNACG Group's proven track record in aircraft as well as equipment/machinery leasing business, the CNACG Group has a better understanding of the Group's business needs and communications between the Company and the CNACG Group tend to be smoother and for them to reach an agreement in the best interests of both parties.

In addition, considering certain subsidiaries of CNACG, as the lessor, are located in China's Free Trade Zones and qualified for certain industry-supportive policies, by utilising the leasing platform for finance leases services of the CNACG Group, the Group is able to secure aircraft/equipment tailored to its specific needs, benefiting from lower financing costs, greater flexibility, and reduced cash flow impact compared to direct purchases.

In addition to the anticipated industry-supportive grants provided under the abovementioned industry- supportive policies, we have been advised by the Management the Group can benefit from the lower effective interest rates by utilising aircraft finance lease under the CNACG Framework Agreement, when compared to secured loan arrangements with equivalent interest rates available over the same period. The Group is projected to save approximately USD10.46 million, USD14.84 million, and USD13.12 million in total financing costs for each year from 2026 to 2028, respectively. Simultaneously, the CNACG Group can also gain a stable revenue stream, creating a mutually beneficial and win-win relationship for both parties.

Furthermore, as advised by the Management, aviation equipment or machinery (collectively "Aviation Equipment") is usually lower in transaction value as compared to aircraft, and could be tailor-made in nature, and such equipment/machinery may not necessarily have a readily available second-hand market. As such, independent finance institutions do not necessarily offer operating leases for smaller value equipment or may not be willing to provide the financing options for such Aviation Equipment due to a limited market. We however understand from the Management that, other than servicing the specific needs of the Group, CNACG has independent third-party clients such as airports, for operating leases involving Aviation Equipment.

We also note in the 2023 Annual Report and 2024 Annual Report that around 56.80% and 56.34 % of the aircraft fleet of the Group were held under either finance lease or operating lease as at 31 December 2023 and 31 December 2024 respectively and as such, the renewal of the CNACG Framework Agreement, in particular, in relation to the finance and operating lease services of aircraft, equipment and machinery is considered in line with the Group's business financing strategy.

Given that (i) the CNACG Group has experience, expertise and have been providing leasing services to the Group for a long time, and (ii) not only that the renewal of the CNACG Framework Agreement will continue to enhance financing flexibility for the Group as discussed in the paragraphs above, most importantly, it will not obligate the Group to enter into any transactions with the CNACG Group, but will provide the Group with the flexibility to choose the CNACG Group for its finance/operating leasing services if the terms provided are at a market rate or better, we are of the view that the entering into of the Non- exempt Transactions pursuant to the renewal of the CNACG Framework Agreement is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders.

4. Principal Terms of the Non-exempt Transactions under the CNACG Framework Agreement

Services The CNACG Group will provide finance and operating lease services in respect of, including but not limited to, aircraft, engines, simulators, aircraft-related materials, equipment and vehicles to the Group.

Pricing The final transaction price will be determined on arm's length negotiations between both parties with reference to the prices for the same type of lease services offered by independent third parties and after taking into account certain factors. Such factors include purchasing price of the leasing subject, interest rate and arrangement fees (if any) (for finance lease), rental fee (for operating lease), the lease terms, the feature of the leasing subject and the comparable market rental prices. The final transaction price should not be higher than the transaction prices offered by at least two independent third parties on the same conditions.

We have discussed with and understand from the Management that aircraft finance lease ("Aircraft Finance Lease") transactions accounted for majority of the historical transactions value for the Non-exempt Transactions under the CNACG Framework Agreement and the Company would compare the terms, including pricing terms offered by independent third parties so as to ensure that the terms offered by the CNACG Group are fair and reasonable, no less favourable compared to independent third parties and on normal commercial terms.

As confirmed with the Management, there was no finance lease transaction for Aviation Equipment entered into between the CNACG Group and the Group during FY2023, FY2024 and up to the Latest Practicable Date. We have further discussed with and understand from the Management that before entering into any operating lease transactions for aircraft ("Aircraft Operating Lease") and/or Aviation Equipment ("Aviation Equipment Operating Lease"), it would firstly research into the costs associated with direct purchase of the aircraft and/or Aviation Equipment it requires and compare against potential costs of lease associated with entering into an operating lease for the same aircraft and/or Aviation Equipment. After taking into consideration the commercial factors including business needs, should the Company decide to enter into an operating lease for the aircraft and/or Aviation Equipment, the Company would then either compare the terms offered by the CNACG Group with terms offered for that similar aircraft and/or Aviation Equipment already leased by the Company and/or request the CNACG Group, to the greatest extent possible, to provide terms offered by the CNACG Group for the same or similar aircraft and/or Aviation Equipment to its independent third-party clients, so as to ensure that the terms offered by the CNACG Group in relation to the aircraft and/or Aviation Equipment are fair and reasonable, no less favourable and on normal commercial terms.

There was no Aircraft Operating Lease transaction between the CNACG Group and the Group for FY2023, FY2024 and up to the Latest Practicable Date. Based on our discussion with the Management, in respect of Aircraft Operating Lease under the CNACG Framework Agreement, we understand from the Management that the rental fees are determined with reference to prevailing market rates or professional appraisals subject to arm's length negotiations between the parties, which will take into account commercial negotiation with relevant stakeholders and technical assessments of various factors, including but not limited to aircraft's configuration, maintenance status, and operational performance, etc. Based on our review of the continuing connected transaction circulars published by the peers of the Company, namely China Southern Airlines Company Limited (stock code: 1055.HK) ("CSA") and China Eastern Airlines Corporation Limited (stock code: 670.HK) ("CEA") (which we consider to be fair and representative as both airlines are state- owned and listed on the Hong Kong Stock Exchange) regarding Aircraft Operating Lease transactions in the past three years, we note that the circular published by CSA on 1 December 2022 (the "2022 CSA Circular") and CEA on 26 December 2022 (the "2022 CEA Circular") contained relevant disclosure on pricing basis of aircraft operating lease transactions and we further note that similar determination basis is adopted by both CSA and CEA in respect of Aircraft Operating Lease.

Based on our understanding from the Management, interest rates used for Aircraft Finance Lease for, among others, aircraft, are usually determined with reference to loan market quoted interest rate ("LPR") promulgated by the People's Bank of China ("PBOC") and that the period of Aircraft Finance Lease would normally exceed five years. We note the LPR promulgated by PBOC for period greater than five years is 3.50% as at the Latest Practicable Date, which is similar to the interest rate of 3.6% adopted by the Company for estimating the proposed annual caps for the three years ending 31 December 2028 for the Non-exempt Transactions.

We have obtained from the Company (i) the only two transactions of Aircraft Finance Lease transactions conducted between the Group and the independent third parties in years 2023 and 2024 ("Sample Aircraft Finance Lease") and (ii) 1 sample of Aircraft Finance Lease transaction conducted in 2023 and 2 samples of Aircraft Finance Lease transactions conducted in 2024 out of the transaction list of the total 7 Aircraft Finance Lease transactions between the Group and the CNACG Group ("Sample CNACG Aircraft Finance Lease") during the years 2023 and 2024 for comparison with the Aircraft Finance Lease transactions under the CNACG Framework Agreement. We consider the number of samples and the sampling period (i.e. 2023 and 2024) to be sufficient and are fair and representative from our perspective.

We note that the lease interest rates were all benchmarked against the LPR published by the PBOC +/- certain percentage and lease terms of 10 years, in particular, the Sample CNACG Aircraft Finance Lease transactions were with nil handling fee, which compared favourably to the terms of the Sample Aircraft Finance Lease. As such, we consider the terms of Aircraft Finance Lease offered by the CNACG Group under the CNACG Framework Agreement to be commercially reasonable and not deviating from those offered by independent third parties under the comparable market conditions.

There was only one transaction of Aviation Equipment Operating Lease conducted between the CNACG Group and the independent third party from 2023 to 2024 ("Sample Aviation Equipment Operating Lease") and we have obtained the relevant transaction documents together with 1 sample of that similar equipment between the Group and the CNACG Group ("Sample CNACG Aviation Equipment Operation Lease") during the years 2023 and 2024 for comparison with the Aviation Equipment Operating Lease transactions under the CNACG Framework Agreement. We note that the rental fee for Sample Aviation Equipment Operating Lease and the Sample CNACG Aviation Equipment Operating Lease of that similar equipment is settled on the same basis, which is quarterly basis and that the rental expenses for the similar equipment charged by the CNACG Group on the Group are lower than those charged on the independent third party.

Based on the above, we consider that the terms of the Non-exempt Transactions are no less favourable compared to independent third parties, and generally in line with the market and such arrangement with the CNACG Group is fair and reasonable.

5. Proposed Annual Caps

Set out below are the historical transaction figures of the Non-exempt Transactions under the CNACG Framework Agreement for FY2023, FY2024 and the expected transaction amount of the Non-exempt Transactions for the year ending 31 December 2025 ("FY2025") estimated by the Company and the proposed annual caps for the three years ending 31 December 2026 ("FY2026"), 31 December 2027 ("FY2027") and 31 December 2028 ("FY2028") for the Non-exempt Transactions ("Proposed Annual Cap(s)") to be contemplated under the CNACG Framework Agreement:

Notes:

1. The utilisation rate is calculated as the actual/expected transaction amount of Non-exempt Transactions divided by the Historical Annual Cap for the respective year.

2. The amount of RMB7,466 million represents the expected transaction amount for FY2025 estimated by the Company.

With respect to the utilisation rate of the historical annual caps ("Historical Annual Caps") of the Non-exempt Transactions, we note that the actual amount of total value of right-of-use assets in relation to the finance and operating leases entered into by the Group as lessee amounted to approximately RMB808 million and RMB1,948 million for FY2023 and FY2024 respectively and the expected transaction amount for FY2025, which as advised by the Management, is estimated based on the Group's plan to introduce 47 aircraft in 2025 with no more than 50% of the acquisition cost would be financed with the Aircraft Finance Lease with the CNACG Group, would be RMB7,466 million, representing a utilisation rate of approximately 5.8%, 11.8% and 42.7% (estimated) for FY2023, FY2024 and FY2025, respectively.

We have discussed and understand from the Management that the relatively lower utilisation rate for the Historical Annual Caps for FY2023, FY2024 and FY2025 (estimated) was principally due to the uncertainties in aircraft delivery by manufacturers, in particular, the production delay of B737 series from Boeing as advised by the Management, resulting in delays and a reduction in the number of aircraft acquired through finance lease compared to initial plans. Additionally, the proceeds raised from the Company's non-public issuance of shares in 2022 and 2024 ("Shares Issuance Exercises") were primarily used to purchase aircraft directly, which further reduced the number of aircraft introduced through finance leases. Based on our review of the Company announcements in relation to the Shares Issuance Exercises published on the website of the Hong Kong Stock Exchange, the Shares Issuance Exercises were completed on 17 January 2023, 7 February 2024 and 12 December 2024 respectively with aggregate gross proceeds of RMB23 billion, of which RMB15 billion were intended to apply for purchasing 39 aircraft.

Basis for Determining the Proposed Annual Caps

As stated in the Letter from the Board, the Proposed Annual Caps for the three years ending 31 December 2028 for the Non-exempt Transactions are determined with reference to the following primary factors:

(i) When estimating the total value of right-of-use assets in relation to the aircraft under finance lease in the following three years, the Company has considered the followings:

(a) historical transaction amounts;

(b) the aircraft introduction plan of the Group and the assumption that 50% of the aircraft to be introduced during the years from 2026 to 2028 for which funding arrangements have not been finalised will be introduced through finance lease with the CNACG Group; The proposed annual cap for 2028 is lower than it for 2027 primarily because the proposed annual caps are derived based on the aircraft introduction plan of the Group. The aircraft introduction plan is driven by operational and strategic considerations which are formulated through comprehensive analysis of multiple operational factors including fleet composition optimisation, strategic market deployment and planned capacity allocation. It is estimated that more aircraft will be introduced in 2027 than in 2028, leading to lower proposed annual cap for 2028 compared to it for 2027;

(c) given the expected lease term of 10 to 12 years for each aircraft under finance lease, the calculation of aircraft finance lease interest rate uses the People's Bank of China's over-five-year RMB Loan Prime Rate (LPR) of 3.6% as of 30 April 2025;

(d) based on the information currently available to the Group, it is anticipated that CNACG Group will not charge the Group arrangement fees for finance leases in the coming three years, and accordingly no arrangement fees have been included in the annual cap estimates.

(ii) When estimating the total value of right-of-use assets under operating leases for aircraft, engines and ground equipment in the following three years, the Company has considered the followings:

(a) in respect of aircraft operating leases, the estimation is primarily based on the Group's aircraft induction and retirement plans, and assuming no more than 10 aircraft will be introduced through operating leases with the CNACG Group for each of the years from 2026 to 2028. The lease rentals will be determined mainly by reference to prevailing market rates or professional appraisals subject to arm's length negotiations between the parties;

(b) in respect of the operating leases of engines and ground equipment, the estimation takes into account the current lease arrangements, the operational status of the Group's engines, simulators and equipment, along with anticipated commercial demand for operating lease in the next three years. Specifically, the Group plans to lease annually from the CNACG Group one to two used engines and 23 ground equipment units, with lease terms typically ranging from 1 to 12 years.

(iii) An exchange rate of RMB7.3: USD1.0 is adopted for the calculation of the proposed annual caps.

(iv) A reasonable buffer of 5% is reserved to accommodate unforeseen circumstances, ensuring flexibility in the financial planning process.

(v) Based on the above, the Company expected that for the three years ending 31 December 2028, the total annual rental fee payable by the Group to the CNACG Group throughout the lease term for aircraft, engines and ground equipment under finance lease and operating lease entered into will not exceed RMB15 billion, RMB20 billion and RMB18 billion, respectively. By adopting the incremental borrowing rate of the Company as the discount rate (ranging from 2.24% to 2.74%) to discount such estimated future total rental fee, the total value of the right-of-use assets under the finance leases and operating leases entered into by the Group as the lessee for the three years ending 31 December 2028 will not exceed RMB14.8 billion, RMB19.5 billion and RMB17 billion, respectively.

For our due diligence purpose, we have discussed with the Management and reviewed the basis adopted by the Company in determining the Proposed Annual Caps for the Non-exempt Transactions under the CNACG Framework Agreement as follows.

Based on our discussion with the Management and for reasons outlined above, the relatively lower utilisation rate for the Historical Annual Caps was principally due to uncertainties in aircraft delivery by manufacturers and the aircraft purchasing plan of the Company was mostly funded by the proceeds raised in the Shares Issuance Exercises.

In addition, based on our review of the annual reports of the Company, the Company has also been postponing/slowing its pace to acquire aircraft to update and/or replace its existing fleet and portfolio. Prior to FY2020, the Group has been acquiring on average, 56 aircraft per year, and phasing out, on average 20 aircraft per year. We also note that the average age of the Group's fleet prior to COVID-19 pandemic was approximately 6.48 years. However, for the years from 2020 to 2023, the average growth in total fleet dropped to 29 aircraft per year and phasing out only, on average 10 aircraft per year. We note that the Company has demonstrated its effort in acquiring aircraft in 2024 and the Group had acquired 36 aircraft as disclosed in the 2024 Annual Report. As such, we consider the Group's business and financing plans to enhance its financial flexibility with finance lease/operating lease options in order to update its existing portfolio of aircrafts and expand its fleet size are commercially justifiable, in particular, from a business perspective so that it would be able to remain competitive to its closest peers and to align with the growth prospects of the aviation industry as supported by the statistics published by IATA and CAAC as discussed in section headed "2. Overview of Aviation Industry" in this letter. As such, leaving a sufficient portion on buffer when determining the annual caps for the coming three financial years ending 31 December 2028 is not without basis.

We have discussed and understand from the Company that the Proposed Annual Caps for Non- exempt Transactions, are estimated based on the total value of right-of-use assets in relation to the finance and operating leases of aircraft, which is positively co-related to the growth in the Group's fleet of aircraft. We note that the Proposed Annual Cap for FY2028 is RMB17,500 million as compared to RMB19,500 million for FY2027. As disclosed in the Letter from the Board, we understand that the number of aircraft to be introduced in 2028 is expected to be lower than that for FY2027, we consider the lower Proposed Annual Cap for 2028 as compared to 2027 to be reasonable.

According to the 2024 Annual Report and based on the information provided by the Management, the Group was intended to introduce 47 aircraft, 44 aircraft, and 59 aircraft for 2025, 2026, and 2027 respectively, of which 50% of the total amount of the introduced aircraft for which funding arrangements have not been finalised would be acquired through finance lease arrangement with the CNACG Group. As such, the maximum aggregate principal amount of total value of right-of-use assets in relation to the Aircraft Finance Lease ("Aircraft Finance Leases PV") with the CNACG Group during 2026 to 2028, shall not exceed half of the aggregate consideration amounts for the total aircraft projected to be added using finance leases during the said year. We have reviewed the Company's 2023 Annual Report and 2024 Annual Report and noted that the Group introduced 36 aircraft for 2024, and the number of fleet under finance lease increased by 12 aircraft from 2023 to 2024.

To assess whether the computation process adopted by the Company to account for half of the expected total amount of aircrafts scheduled to be introduced using finance lease as the relevant principal amount is a market norm, we have reviewed and also noted that the Company's peers, the other two state-owned airlines listed on the Hong Kong Stock Exchange, namely CSA and CEA in their respective continuing connected transaction circulars dated 1 December 2022 and 26 October 2022 also adopted a similar computation process of accounting for 60% and half of the expected total purchase price of total aircrafts scheduled to be introduced as the relevant principal amount respectively.

As mentioned in the letter from the Board, the aircraft introduced by way of operating lease with the CNACG Group will be no more than 10 aircraft for each year. Based on our discussion with the Management, the acquisition of new aircraft and the sales and leaseback arrangements for middle- aged to older-generation aircraft via operating lease is a common financing method in the aviation industry and aligns with the industry practices. We note from both 2022 CSA Circular and the annual results announcement of CEA for FY2024 that the Company's peers have adopted the operating lease arrangements for financing the acquisition of aircraft.

Discount Rate

Similar to previous financial years, pursuant to IFRS (International Financial Reporting Standards) 16, the finance leases entered into by the Company as the lessee will be recognised as right-of-use assets and discounted using the Company's incremental borrowing rate, and the result of such calculation is used to determine the annual caps relating to the Non-exempt Transactions. Therefore, the amounts of Aircraft Finance Leases PV and total value of right-of-use assets in relation to the operating lease of aircraft ("Aircraft Operating Leases PV") for each of the years 2026, 2027 and 2028 are derived based on the total value of right-of-use assets relating to the aircraft finance and operating leases expected to be entered into between the Company and the CNACG Group during 2026, 2027 and 2028 respectively. We have reviewed the computation inputs of the respective values for the right-of-use assets relating to the planned aircraft finance and operating leases and noted that it is calculated by discounting the estimated total financing amount required for new aircrafts (including interest with zero arrangement fees) to be introduced for the particular year by a discount rate of 2.74% (for leases with terms over 5 years) which is equivalent to the Company's prescribed internal incremental borrowing rate for loans/leases over five years. We have reviewed the 2024 Annual Report and noted that the interest rate for the Group's interest bearing bank loans and other borrowings ranged from 1.6% to 4.38% (median interest rate being 2.99%), and range of interest rates for corporate bonds repayable and short-term commercial papers is from 2.03% to 3.46% (median interest rate being 2.745%). Given the abovementioned ranges and medians of interest rates applicable to the Group's interest-bearing bank loans and other borrowings, and the fact that the internal rate being 2.74% is towards the high end of the median interest rates and in the middle range of the aforementioned quoted ranges, we would consider the Company's use of internal rate of 2.74% to be prudent.

We have discussed and understand from the Management that the anticipated total value of right-of-use assets in relation to the Aviation Equipment Operating Lease for each of the three years ending 31 December 2028 ("Aviation Equipment Leases PV") represents the present value of engines and other aviation related equipment that are capable to be supplied by CNACG and in response to the Group's estimated demand which is based on internal budgets and purchase schedules. As mentioned above, the Group plans to lease one to two used engines annually and 23 ground equipment units annually, from the CNACG Group during 2026 to 2028, with lease terms typically ranging from 1 to 12 years. The Group will only enter into lease agreements with members of the CNACG Group if terms offered by the CNACG Group are on normal commercial terms or better.

From the information provided that the lease period for engines normally ranges between 5 to 12 years and for other aviation equipment, the lease period ranges between 1 to 6 years. Similar to that of Aircraft Finance Leases PV and Aircraft Operating Leases PV, pursuant to IFRS 16, Aviation Equipment will be recognised as right-of-use assets and such right-of-use asset value is used to determine the annual cap for Non-exempt Transactions. The Aviation Equipment Leases PV are derived from the expected total value of right-of-use assets relating to the engines and other aviation equipment operating lease, which is computed by discounting the estimated total rental fee for Aviation Equipment introduced each year as discussed above, by the Company's internal incremental borrowing rate. As advised by the Management, the prescribed internal incremental borrowing rate referred to for leases with a term longer than five years is 2.74%, and 2.24% for leases with a term of 5 years or below. Similar to the aforementioned with Aircraft Finance Lease PV and Aircraft Operating Leases PV, based on the information in the 2024 Annual Report, the interest rate for the Group's interest bearing bank loans and other borrowings ranged from 1.6% to 4.38% (median interest rate being 2.99%), and range of interest rates for corporate bonds repayable and short-term commercial papers is from 2.03% to 3.46% (median interest rate being 2.745%). Given the abovementioned ranges and medians of interest rates applicable to the Group's interest-bearing bank loans and other borrowings, and the fact that the internal rates, being 2.74% (for leases with term longer than 5 years) or 2.24% (for leases with term of 5 years or below) are both towards the high end of the median interest rates and in the middle range of the aforementioned quoted ranges, we would consider the Company's use of internal rates of 2.74% and 2.24% to be prudent.

We also note that the Management has included a buffer of approximately 5% in its estimated amounts for each of the annual caps for 2026, 2027, and 2028. We have discussed and understand that the aforementioned buffer is included to accommodate unforeseen circumstances. We consider the use of a buffer of approximately 5% to be commercially acceptable.

Based on the discussion above, we consider such estimates for (i) calculating the estimation for Aircraft Finance Lease PV, Aircraft Operating Leases PV and Aviation Equipment Leases PV for three years ending 31 December 2028; and (ii) the total value of the right-of-use assets under the finance leases and operating leases entered into by the Group as the lessee under the CNACG Framework Agreement of approximately RMB14.8 billion, RMB19.5 billion and RMB17 billion, respectively for the three years ending 31 December 2028, are fair and reasonable as far as the Company and Independent Shareholders are concerned.

6. Internal Control

The Company has also adopted the measures as set out under the section headed "Internal Control Procedures" of the Letter from the Board for monitoring the CNACG Transactions and to ensure that the CNACG Transactions (including the Non-exempt Transactions) will be conducted on normal commercial terms and in accordance with the CNACG Framework Agreement and the pricing policies of the Group.

Upon our enquiry, we note that the Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 to 14A.59 of the Hong Kong Listing Rules pursuant to which (i) the values of the CNACG Transactions (including the Non-exempt Transactions) must be restricted by the applicable annual caps for the period concerned under the CNACG Framework Agreement; (ii) the terms of the CNACG Transactions (including the Non-exempt Transactions) must be reviewed by the independent non- executive Directors annually; and (iii) details of independent non-executive Directors' annual review on the terms of the CNACG Transactions (including the Non-exempt Transactions) must be included in the Company's subsequent published annual reports and financial accounts.

Furthermore, it is also required by the Hong Kong Listing Rules that the auditors of the Company must provide a letter to the Board confirming, among other things, whether anything has come to their attention that causes them to believe that the CNACG Transactions (including the Non-exempt Transactions)

(i) have not been approved by the Board; (ii) were not, in all material respects, in accordance with the relevant agreement governing the transactions; and (iii) have exceeded the applicable annual caps. We have obtained from the Company and reviewed the letters issued by the Company's external auditors in 2023 and 2024 and note that the auditors have confirmed that the internal control procedures implemented by the Company have been effective in all material aspects.

Given the above stipulated requirements for continuing connected transactions pursuant to the Hong Kong Listing Rules, we concur with the view of the Directors that the Company has internal control in place to monitor the CNACG Transactions (including the Non-exempt Transactions) and thus the interest of the Independent Shareholders would be safeguarded.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that the Non-exempt Transactions under the CNACG Framework Agreement are conducted on normal commercial terms and in the ordinary and usual course of business of the Group, and are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Company and the Shareholders as a whole, and that the Proposed Annual Caps are also fair and reasonable. Accordingly, we recommend the Independent Shareholders, and the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the relevant ordinary resolution to be proposed at the AGM.

Yours faithfully,

For and on behalf of

BaoQiao Partners Capital Limited Irene Poon

Executive Director

Ms. Irene Poon is a responsible officer registered under the SFO to carry out Type 6 (advising on corporate finance) regulated activity for BaoQiao Partners Capital Limited and has over 20 years of experience in the accounting and corporate financial services industry.

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS OF DIRECTORS AND SUPERVISORS

As at the Latest Practicable Date, none of the Directors, Supervisors or chief executive of the Company had interests or short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were notifiable to the Company and the Hong Kong Stock Exchange pursuant to the SFO, or were recorded in the register maintained by the Company pursuant to section 352 of the SFO, or which were notifiable to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

As at the Latest Practicable Date, none of the Directors or Supervisors of the Company had any direct or indirect interest in any assets which have been, since 31 December 2024 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors or Supervisors of the Company was materially interested in any contract or arrangement which is significant in relation to the business of the Group and subsisting as at the Latest Practicable Date.

Mr. Patrick Healy, a non-executive Director, is concurrently the chairman and an executive director of Cathay Pacific. Cathay Pacific is a substantial shareholder of the Company, holding 2,633,725,455 H Shares of the Company (representing approximately 15.09% of the total issued shares of the Company) as at the Latest Practicable Date. Mr. Ma Chongxian and Mr. Wang Mingyuan, both are executive Directors, are concurrently non-executive directors of Cathay Pacific. Cathay Pacific competes or is likely to compete either directly or indirectly with some aspects of the business of the Company as it operates airline services to certain destinations, which are also served by the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or Supervisors of the Company and their respective close associates (as defined in the Hong Kong Listing Rules) had any competing interests which would be required to be disclosed under Rule 8.10 of the Hong Kong Listing Rules.

3. DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as the Directors were aware, the following persons (not being a Director or Supervisor or chief executive of the Company or their associate) had an interest or short position (if any) in the Shares or the underlying Shares which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register of the Company required to be kept under section 336 of the SFO:

Notes:

(1) By virtue of CNAHC's 100% interest in CNACG, CNAHC was deemed to be interested in the 1,332,482,920 A Shares and 616,779,308 H Shares directly held by CNACG.

(2) By virtue of John Swire & Sons Limited's 100% interest in John Swire & Sons (H.K.) Limited and their approximately 63.05% equity interest and 70.13% voting rights in Swire Pacific Limited, and Swire Pacific Limited's approximately 44.98% interest in Cathay Pacific as at the Latest Practicable Date, John Swire & Sons Limited, John Swire & Sons (H.K.) Limited and Swire Pacific Limited were deemed to be interested in the 2,633,725,455 H Shares of the Company directly held by Cathay Pacific.

(3) The letter "L" denotes a long position in the Shares.

Save as disclosed above, as at the Latest Practicable Date, no other persons (not being a Director or Supervisor or chief executive of the Company or their associate) had any interest or short position (if any) in the Shares or the underlying Shares which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register of the Company required to be kept under section 336 of the SFO.

4. SERVICE CONTRACTS OF DIRECTORS AND SUPERVISORS

As at the Latest Practicable Date, none of the Directors or Supervisors had any existing or proposed service contract with any member of the Group which is not expiring or terminable by the Group within one year without payment of compensation (other than statutory compensation).

5. DIRECTORS' AND SUPERVISORS' EMPLOYMENT WITH SUBSTANTIAL SHAREHOLDERS

The followings are the particulars of Directors' and Supervisors' employment with substantial Shareholders (holding interests or short positions in the shares and underlying shares of the Company required to be disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO) as at the Latest Practicable Date:

Directors

Mr. Ma Chongxian, an executive Director, the chairman of the Board and the secretary of the Party Committee of the Company, serves as a director, the chairman, a member of the Party Leadership Group and the secretary of the Party Leadership Group of CNAHC. He is also the deputy chairman of the board of directors and a non-executive director of Cathay Pacific.

Mr. Wang Mingyuan, an executive Director, the vice chairman of the Board, the president and the deputy secretary of the Party Committee of the Company, serves as a director, the general manager, a member of the Party Leadership Group and the deputy secretary of the Party Leadership Group of CNAHC. He is also a non-executive director of Cathay Pacific.

Mr. Cui Xiaofeng, a non-executive Director of the Company, is a director, a member of the Party Leadership Group and the deputy secretary of the Party Leadership Group of CNAHC.

Mr. Patrick Healy, a non-executive Director of the Company, is the chairman of the board of directors and an executive director of Cathay Pacific, a director of Swire Pacific Limited, and a director of John Swire & Sons (H.K.) Limited.

Mr. Xiao Peng, the employee representative Director of the Company, serves as the chairman of the labour union and the employee representative director of CNAHC.

Supervisor

Ms. Lyu Yanfang, a Supervisor of the Company, serves as the general manager of the law department of CNAHC.

6. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, there has been no material adverse change in the Group's financial or trading position since 31 December 2024, being the date to which the latest published audited financial statements of the Group have been made up.

7. LITIGATION

As at the Latest Practical Date, the Company was not involved in any significant litigation or arbitration and to the knowledge of the Company, there were no litigation or claims of material importance pending or threatened against any member of the Group.

8. EXPERT

The following is the qualification of the expert who has given its opinions or advices, which are contained in this circular:

a. As at the Latest Practicable Date, BaoQiao Partners did not have any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2024 (the date to which the latest published audited financial statements of the Group were made up);

b. As at the Latest Practicable Date, BaoQiao Partners was not beneficially interested in the share capital of any member of the Group and had no right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and

c. BaoQiao Partners has given and has not withdrawn its written consent to the issue of this circular with inclusion of its opinion and the references to its name, logo and qualification included herein in the form and context in which they respectively appear. The letter and recommendation from BaoQiao Partners are given as of the date of this circular for incorporation herein.

9. MISCELLANEOUS

a. The joint company secretaries of the Company are Mr. Xiao Feng and Mr. Huen Ho Yin. Mr. Huen Ho Yin is a practicing solicitor of the High Court of Hong Kong

b. The registered address of the Company is at 1st Floor - 9th Floor 101, Building 1, 30 Tianzhu Road, Airport Industrial Zone, Shunyi District, Beijing, the PRC. The head office of the Company is at No. 30 Tianzhu Road, Airport Industrial Zone, Shunyi District, Beijing, the PRC.

c. The H Share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited, the address of which is Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong.

10. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (www.airchina.com.cn) for a period of 14 days from the date of this circular:

a. the CNACG Framework Agreement; and

b. this circular.

2024 WORK REPORT OF THE BOARD OF AIR CHINA

In 2024, the Board of Air China adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implemented the guiding principles of the 20th National Congress of the Communist Party of China (CPC) and the Second and Third Plenary Sessions of the 20th CPC Central Committee as well as the resolutions and deployments of the CPC Central Committee and the State Council, conscientiously implemented the state-owned assets supervision and securities regulatory requirements, and continuously deepen the development of a scientific, rational and efficient Board, striving to promote the Company's high-quality development.

I. CONSCIENTIOUSLY IMPLEMENTED THE RESOLUTIONS AND DEPLOYMENTS OF THE CPC CENTRAL COMMITTEE AND THE STATE COUNCIL, AND RESOLUTELY FULFILLED THE ECONOMIC, POLITICAL AND SOCIAL RESPONSIBILITIES OF A CENTRAL ENTERPRISE. Firstly, fully embracing its responsibilities and missions as a national flag carrier and ensuring "Two Absolute Safeties (兩個絕對安全)". The Company recorded a total of 2.95 million safe flight hours throughout the year, representing a year-on-year growth of 14%. Aircraft movements amounted to 1.13 million, representing a year-on-year increase of 10.1%, and 155 million passengers were transported, representing a year-on-year increase of 20.9%. Secondly, aligning closely with the national regional development strategy and contributing to the major-country diplomacy with Chinese Characteristics. The Board pushed ahead with the cooperation with local governments in the Beijing-Tianjin-Hebei, the Yangtze River Delta, the Guangdong-Hong Kong-Macau Greater Bay Area and Chengdu-Chongqing, and steadily advanced the expansion of international routes. 63 "Belt and Road" related routes were operational across 28 countries, with flight volumes surpassing that of 2019. Thirdly, aligning with the strategy of domestically produced large aircrafts. 33 C909 aircraft operated normally. The Company approved the introduction of 100 C919 aircraft and became the launch customer for C929 aircraft. Fourthly, accelerating the cultivation of new quality productive forces. With a focus on three major R&D initiatives: domestic civil aircraft R&D/operations, intelligent flight operation control and air-ground connectivity for in-flight networks, the Board promotes the Company to facilitate the joint research on the core technologies and key areas of Beidou navigation. Fifthly, strengthening digitalization development. The Board approved "Top-Level Design Plan for Digitalisation Development" and established the Digital Transformation Office to drive the implementation of the comprehensive digitalization planning strategy and related projects. Sixthly, comprehensively promoting the deepening of reforms. The Board has completed 263 reform initiatives, achieving 71.5% of its three-year reform target. Seventhly, improving the modern corporate system with Chinese characteristics. The Company strictly ensured that preliminary research were carried out by the Party Committee for material operation and management matters. Among the 37 proposals considered and approved by the Board, 22 were undergone preliminary research and discussion by the Standing Committee of the Party Committee of the Company.

II. ACCELERATED THE ESTABLISHMENT OF A SCIENTIFIC, RATIONAL AND EFFICIENT BOARD TO LEAD AND SUPPORT THE HIGH-QUALITY DEVELOPMENT.

Firstly, improving the institutional development. The Articles of Association and the Checklist of Rights and Responsibilities for Material Matters (重大事項權責清單) were amended to clearly define the scope of rights and responsibilities. The "Four Yes-and-No" (四個是否) review requirements for preliminary deliberations were amended and refined, so as to reinforce the leading role of the Party in setting strategic direction, overseeing broader interests and ensuring implementation. Secondly, implementing state-owned assets supervision and enhancing the quality of Board development. The Board deepened its understanding of the guiding principles from the Conference on Advancing Board Development in Central Enterprises (中央企業董事會建設工作推進會), conducted research on and formulated the "Task List for Board Development" (董事會建設任務清單) and made deployment for implementing special initiatives to elevate board governance quality across all subsidiaries. Thirdly, optimizing the operational mechanisms. The Board formulated its work plan scientifically with arrangements for matters including the meetings of the Board and the special committees, investigations and research and trainings. The advance reporting mechanism was implemented, under which major matters including the introduction of 100 C919 aircraft were communicated and reported to external directors in advance. The supervision mechanisms were implemented to strengthen the supervision over the rectification of issues identified in central inspections and audits, and the feedback mechanism was implemented to improve the work arrangements in relation to the implementation of and response to the opinions and recommendations of directors. Fourthly, strengthening communication and coordination. Regulatory authorities were invited to attend the meetings of the Board to enhance work guidance. The communication between the Board and the Party Committee was strengthened through the establishment of a two-way communication and exchange mechanism, and the communication between the management and the Board was strengthened with all management team members regularly attending Board meetings, and the management regularly reporting to the Board on the implementation progress of resolutions, authorized matters and the opinions and recommendation of directors. Fifthly, enhancing the development standards of the board of directors of subsidiaries.The Board reinforced the foundation of the governance systems of the subsidiaries, promoted standardized operation of the boards of directors and strengthened the development of the team of directors with dedicated duties. Sixthly, improving the quality of listed companies.The Board was awarded the "Best Practice Case of Board of Directors of Listed Companies in 2024" by the China Association of Public Companies (中國上市公司協會) and was awarded an 'A' Grade in information disclosure by the Shanghai Stock Exchange for 11 consecutive years. The Company published its social responsibility (ESG) reports for 16 consective years, fully utilized its listing platform functions and completed the non-public issuance of A-shares and H-shares of RMB8 billion. The research on market capitalization management was advanced and a market capitalization management mechanism was established.

III. STRENGTHENED THE MAIN FUNCTION OF THE BOARD IN DECISION-MAKING ON OPERATION, AND GAVE FULL PLAY TO ITS ROLE IN FORMULATING STRATEGIES, DECISION-MAKING AND RISK PREVENTION.

(I) The Board strengthened its strategic leadership and fulfilled its strategic functions. With a firm commitment to national priorities, the Board accurately identified the new positioning and mission of an air transportation enterprise within China's civil aviation power-nation strategy and the new development paradigm. By leveraging the "dual pathways" and fulfilling the "three roles", it oversaw the entire process of strategy formulation, implementation, and evaluation, ensuring scientifically sound strategic goals to steer corporate reform and development. Firstly, robust strategy implementation was advanced.Focusing on building a world-class air transportation industry group, the Board convened a strategy-decoding conference to coordinate progress on the "eight critical campaigns". Together with the members of the Party Committee and the senior management, the Board analyzed the current situation, benchmarked against the major requirements for strengthening core functions and competitiveness, identified gaps and deficiencies, and further solidified consensus to reinforce strategic leadership. The Board actively promoted the implementation of value creation initiative and aligned efforts with key tasks in the "14th Five-Year" Plan. Secondly, strategic emerging industries expanded rapidly.The Board formulated a development plan for strategic emerging industries and supporting policies, advanced the systematic digital transformation projects, and conducted a comprehensive review of the fundamental aspects across three key domains and mapped out growth directions, fostering a data-driven value creation mindset. It launched a range of pivotal long-term projects, such as full-fleet air-ground connectivity upgrades and digitalized dispatch systems. Thirdly, groundwork for the 15th Five-Year Plan commenced. The Board designed the planning framework for the 15th Five-Year Plan, outlined guiding principles and progress schedule, and coordinated preliminary research for Air China, Shenzhen Airlines, and Shandong Airlines. It initiated fleet planning studies to analyze market trends, aircraft performance, and fleet management, yielding preliminary proposals. Emphasis was placed on industry trend analysis and strategic research, ensuring alignment with national, industrial and regional plans to chart the course of development and reform for the next five years. Fourthly, the strategic evaluation system was optimized. Anchored in high-quality development and aligned with national and industrial strategies, the Board dynamically optimized the medium-to-long-term planning system to ensure corporate planning objectives and pathways remained congruent with regulatory requirements. Enhanced monitoring and tiered evaluations safeguarded operational decisions' adherence to strategic plans and focus on the primary responsibilities and main business of the Company, mitigated strategic risks, and corrected implementation deviations promptly.

(II) Strengthened rational decision-making and performed decision-making functions. The Board focused on the implementation of the Central Government's policy directives, coordinated state-owned assets supervision and securities regulation, and promoted the implementation of major projects through scientific and rational decision-making. Firstly, pre-meeting communication was enhanced. Meeting-related documents were distributed in advance to facilitate external directors' review, with their opinions actively solicited through pre-meeting consultations. For instance, during preliminary discussions and reporting on the introduction of 100 C919 aircraft, external directors provided critical inputs on debt ratio implications, economic feasibility, and legal risks, leading to refined feasibility reports and supplementary data that improved the Board's decision efficiency and quality. Secondly, in-depth and focused research was conducted.Closely monitoring the Company's strategies and the Board's decisions, the Board conducted in-depth investigations and researches on the front line to best keep abreast with the prevailing conditions of the enterprise and the actual situation. In 2024, the external directors completed 4 field investigations in 2024 focusing on strategic synergies, digital transformation, marketing and sales, brand services and overseas risk management, producing 4 reports with 26 actionable recommendations on management and development to provide important reference and support for evidence-based decisions and high-quality development. Thirdly, the special committees provided efficient support. Special committees conducted preliminary reviews of proposals prior to Board deliberations, with committee chairs reporting their recommendations during Board meetings. In 2024, the Board held nine meetings, considered and approved 37 resolutions, including the introduction and retirement of aircraft and major organizational adjustments, and received 20 special reports. The special committees of the Board held 23 meetings, studied and reviewed 36 resolutions, and received 27 reports. Among them, the Strategy and Investment Committee held seven meetings, the Audit and Risk Management Committee (the Supervision Committee) held seven meetings, the Remuneration and Appraisal Committee held three meetings, the Nomination Committee held three meetings, and the Aviation Safety Committee held three meetings, which robustly supported the Board's informed and efficient decision-making. Fourthly, external directors fully utilized their expertise. With diverse professional experiences and complementary skills, external directors focused on evaluating the "four key criteria", i.e. the legality and compliance of decisions, consistency with investors' and Shareholders' demands, alignment with corporate development strategy and comprehensive risk-reward balance, thereby ensuring independent judgment and decisions. Fifthly, enhanced joint work group collaboration.The chief accountant, chief legal counsel, secretary of the Board and responsible persons of business departments attended meetings on a regular basis, and regularly reported on production and operation, budget execution, risk compliance and corporate governance, so as to strengthen the cross-functional decision-making support.

(III) Strengthened risk prevention and control and performed risk management responsibilities. The Board firmly implements the important instructions and directives of General Secretary Xi Jinping regarding the prevention and resolution of major risks, adheres to a bottom-line mindset, enhances risk awareness, and gives full play to the supervisory role of the Board, so as to effectively prevent and resolve the major risks of the enterprise. Firstly, the Board built

up a strong defense for safe operation. The Board insists on the principle of "putting people and life first (人民至上、生命至上)", prioritizing the protection of people's lives and safety. It proactively examined the safety conditions, strengthened the supervision on safety operation,

established a long-term effective mechanism for safety operation, and continuously improves safety management capabilities and safety standards. Secondly, major business risks were prevented and resolved.The Board conducted in-depth analysis of macroeconomic conditions, overall industry conditions and status of market competition, and identified the top five annual operational risks for the Company: aviation safety operations, fluctuations in operating performance, volatility in oil prices, exchange rates and interest rates, debt and foreign-related legal compliance. The Board provided guidance to formulate the corresponding prevention and control measures, and continuously tracked the risks to ensure a closed-loop management process. The Board conducted risk assessments for major decisions requiring comprehensive evaluation of all significant decisions, and continuously improved assessment quality. The Board also pays close attention to the inspection for foreign-related legal compliance risks. A regular mechanism has been established for identifying such risk, with focus on key areas such as material contracts, large fund management, bidding and procurement and data protection. Monthly checks are conducted for foreign-related legal compliance risks and existing risks are properly addressed. Thirdly, improving the risk prevention and control system.The Board provided guidance on the promotion of integrated management of legal affairs, risk, internal control and compliance, formulated the Regulations on the Management of Legal Dispute Cases 《( 法律糾紛案件管理規定》), the Implementation Rules for Risk Assessment and Reporting 《( 風險評估及報告實施細則》), the Implementation Rules for Internal Controls 《( 內部控制實施細則》). It also scrutinized and approved the evaluation report of internal control and the internal control audit report, the work report on internal audit and the internal audit plan, and the report of financial company on the continuous assessment of risks. Fourthly, the supervision of the Audit Committee was strengthened.The Board emphasized the role of the Audit and Risk Management Committee (the Supervision Committee). In 2024, it promoted to improve mechanisms for risk management, internal control, compliance management, audit supervision and accountability for irregular business and investment activities. The Board reviewed and received 11 special reports during the year. Fifthly, implementing rectifications based on central inspection and audit findings. The Board focused on addressing issues identified during inspections and audits, received specialized reports, and pushed forward both immediate and long-term actions to rectify the issues at root.

In the process of continuously improving corporate governance, Air China has gradually cultivated a robust Board culture. All directors are faithful, diligent and responsible, exercising their rights and fulfilling their obligations in accordance with laws and regulations. The various governance entities provide effective support for each other and operate efficiently.

In 2025, the Board of Air China will further adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, conscientiously implement the decisions and deployments of the CPC Central Committee and the State Council, and carry out the requirements of state- owned assets supervision and securities regulation. Anchored in the strategic goal of building a world-class enterprise, the Board will complete the tasks and fulfilled the objectives of the "14th Five-Year" Plan with high quality, laying a solid foundation for a good start of the "15th Five-Year" Plan.

AIR CHINA LIMITED

2024 WORK REPORT OF THE SUPERVISORY COMMITTEE

In 2024, Air China adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implemented the guiding principles of the 20th National Congress of the Communist Party of China (CPC) and the Second and Third Plenary Sessions of the 20th CPC Central

Committee, comprehensively implemented the "Two Consistencies (兩個一以貫之)" approach, and achieved

positive results in several areas, including safe operation, maximizing operational efficiency, enhancing service quality, and deepening reforms. These efforts have laid a solid foundation for high-quality development and the establishment of a world-class aviation transportation industry group. The Supervisory Committee of the Company has consistently implemented the work requirements of state-owned assets regulation and securities regulation. Based on its functions and positioning, it faithfully and diligently fulfilled its responsibilities in strict accordance with the laws and regulations, including the Company Law and the Securities Law, as well as the relevant requirements provided in the Articles of Association and the Rules and Procedures of the Supervisory Committee. The Supervisory Committee independently exercised its powers in accordance with the law, overseeing and inspecting the Company's finances, related party transactions, the establishment of the internal control system, the use of funds raised and the decision- making procedures of the Board and the General Meeting, as well as the performance of directors and senior management in carrying out their duties. In addition, the Supervisory Committee has actively safeguarded the interests of the Company and its shareholders and the legitimate rights and interests of employees. The work of the Supervisory Committee is hereby reported as follows:

I. PERFORM THE SUPERVISORY AND INSPECTION DUTIES OF THE SUPERVISORY COMMITTEE

(1) Perform its duties according to laws and play the supervisory role. Firstly, the Supervisory Committee attended 4 general meetings of shareholders, 7 on-site meetings of the Board and important special meetings of the Company throughout the year to gain comprehensive insights into the Company's production, operation and significant operational management matters. It focused on the supervision of meeting convening procedures and decision-making procedures. Secondly, the Supervisory Committee attended the Company's annual work meeting, interim work meeting and employee representative meeting. The Supervisory Committee carefully reviewed the work report of the management and the duty performance reports of directors and senior management of the Company, timely monitoring their duty performance; based on the audit inspection and the assessment results of SASAC, the Supervisory Committee followed up on the implementation of SASAC's assessment and corrective actions regarding the Board. Thirdly, the Supervisory Committee regularly supervised the implementation of Board resolutions and authorizations, keeping track of the implementation of decision-making matters and ensuring that the management exercised its powers strictly within the scope of the authorization and in accordance with the laws and regulations.

(2) Effectively strengthen financial supervision. In view of its basic supervisory responsibilities, the Supervisory Committee reviewed the Company's annual, interim and quarterly financial reports, and supervised the Company's financial operations and the preparation, review and disclosure procedures of the reports, to ensure that they truly, objectively and comprehensively reflect the Company's operational management and financial status, and that the information disclosed in the financial reports was true, accurate and complete.

(3) Promote the development of the internal control system. The Supervisory Committee implemented the Company's requirements for legal compliance, quality improvement and efficiency enhancement, further strengthening the development of the Company's internal control system and the implementation of internal control assessment and rectification. While carefully reviewing the internal control implementation plan and assessment report, the Supervisory Committee supervised the internal control assessment and rectification, improved the internal control process framework, and continuously enhanced the internal control management standard of the Company in view of the weaknesses identified and the actual operation and management.

(4) Strengthen supervision coordination. The Supervisory Committee put emphasis on enhancing the communication with the Audit and Risk Control Committee (Supervision Committee) and independent directors, constantly innovated the supervision mechanism and methods to achieve coordinated supervision and resource sharing. Adhering to preventing and eliminating major risks, the Supervisory Committee worked together with the Company's internal audit, compliance, discipline inspection and other supervisory departments to enhance the risk control and supervision system of pre-warning, in-process control and post-event accountability.

II. FOCUS ON LEGAL COMPLIANCE AND IMPROVE THE QUALITY OF DECISION- MAKING AND SUPERVISION

(1) Perform the duties of supervisors. The Supervisory Committee strictly adhered to its role and responsibilities, faithfully and diligently performing its duties. Sticking to the principles of collective review, independent voting and individual accountability, it organized 5 meetings of the Supervisory Committee during the year, making decisions on and supervising 17 major issues, including the annual financial plan, investment plan, financial report, profit distribution proposals, management and use of raised funds, internal control assessment reports and internal control audit reports, as well as related party transactions.

(2) Support the management to exercise their powers and perform their duties. The Supervisory Committee always expressed its opinions from the perspective of safeguarding the interests of the Company and its shareholders, as well as the legitimate rights and interests of employees. It supported the management to promote intensive management and control, synergistic development and refined management initiatives, facilitating the management to perform their duties in operation, implementation and management, promoting the Company's reform and upgrading initiatives and the implementation of the Company's major projects, and assisting the Company in developing into a world-class enterprise.

(3) Enhance the ability to perform duties. Members of the Supervisory Committee actively participated in specialized training programs organized by the China Association for Public Companies and the Listed Companies Association of Beijing. These programs kept them abreast of the latest securities regulatory policies, the standardized operation of listed companies and the practice of the Supervisory Committee, and strengthened their sense of responsibility for performance of duties in legal compliance, thereby enhancing their ability to perform duties and make decisions.

III. EXPRESS SPECIAL OPINIONS BASED ON THE INDEPENDENCE PRINCIPLE

(1) Independent opinions on the lawful and compliant operation of the Company. During the reporting period, the Supervisory Committee attended important meetings of the Board and the Company, received special reports and fully exercised its inspection and supervision powers. The Supervisory Committee held that the Company operated in accordance with the Company Law and the Articles of Association, and that its decision-making procedures were legal and effective. No directors or senior management of the Company have been found to violate laws, regulations or the Company's Articles of Association, nor to harm the interests of the Company or the legitimate rights and interests of employees when performing their duties.

(2) Independent opinions on the Company's financial status. During the reporting period, the Supervisory Committee reviewed the Company's annual report, interim report and quarterly reports for Q1 and Q3 (including financial reports). It concluded that the financial data contained in the above reports truly, accurately and completely reflected the Company's financial status and operating results, and concurred with the standard unqualified audit opinion issued by Deloitte Touche Tohmatsu on the financial reports.

(3) Independent opinions on the Company's related party transactions. During the reporting period, the Supervisory Committee respectively reviewed the continuing connected transactions between the Company and CNAHC Group and its subsidiaries, and the continuing connected transactions between the Company and Air China Cargo Co., Ltd. It considered that the continuing connected transactions of the Company were normal business transactions, with fair and reasonable pricing and terms in compliance with business practices and the arm's length principle, and did not harm the interests of the Company or minority shareholders. Related directors and shareholders abstained from voting during the meetings of the Board meetings and the general meetings of shareholders according to review and consideration procedures in compliance with laws.

(4) Review and independent opinions on the self-assessment report of internal control. During the reporting period, the Supervisory Committee reviewed the Company's internal control assessment report and internal control audit report, monitored and supervised the development of the Company's internal control system and internal control rectification. It considered that the Company's internal control mechanism was continuously improved and its risk control ability was continuously enhanced. The self-assessment report on the Company's internal control issued by the Board reflected the actual status of the Company's internal control in an objective and true manner.

(5) Independent opinions on the deposit and actual use of the proceeds. During the reporting period, the Supervisory Committee reviewed the special report on the deposit and actual use of proceeds, as well as the special report and audit report issued by Deloitte Touche Tohmatsu. It considered that the Company had utilized the proceeds in compliance with the laws and regulations, providing truthful, accurate and complete disclosures regarding the deposit and use of the proceeds, and there were no violations in the management and use of the proceeds.

We hereby submit this report.

Set out below are the details of the proposed amendments to the Articles of Association. The revisions have been underlined (if applicable) for the convenience of perusal.