OVERSEAS REGULATORY ANNOUNCEMENT

RNS Number : 1686Z

Air China Ld

13 March 2012

 



Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

  Air China Limited

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

(Stock Code: 00753)

OVERSEAS REGULATORY ANNOUNCEMENT

This announcement is published pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The attachment to this announcement is the following announcement of

Air China Limited published on the Shanghai Stock Exchange:

Announcement on Impairmentof Aircraft and Related Assets

By order of the Board

Air China Limited

                     Rao Xinyu           Tam Shuit Mui

Joint Company Secretaries

Beijing, the PRC, 12 March 2012

As at the date of this announcement, the directors of the Company are Mr. Wang Changshun, Ms. Wang Yinxiang , Mr. Cao Jianxiong , Mr. Sun Yude , M r. Christopher Dale Pr att, Mr. Ian Sai Cheung Shiu, Mr. Cai Jianjiang, Mr. Fan Cheng, Mr. Fu Yang*, Mr. Li Shuang*, Mr. Han Fangming* and Mr. Yang Yuzhong*.

* Independent non-executive director of the Company

Stock Code: 601111                           Stock Short Name: Air China                           No.: Lin 2012-005

AIR CHINA LIMITED

ANNOUNCEMENT ON IMPAIRMENTOF AIRCRAFT AND RELATED ASSETS

The Company and all members of the board of directors hereby warrant the truthfulness, accuracy and completeness of the contents of this announcement and jointly and severally accept full responsibility for any false representations or misleading statements contained in, or material omission from, this announcement.

In accordance with the strategic development plan of Air China Limited (the "Company") and for the  purposes of  optimizing fleet structure and improving the fleet's overall operating efficiency, the Company had decided in 2010 to dispose 49 old model aircraft before the expiration of their normal useful lives.  The Company  conducted an  impairment  test on the 49 old model aircraft  in 2010 according to the accounting standards and provided for the impairment of related assets according to the results of the test. Such impairment was approved at the seventh meeting of the third session  of the board of directors (the "Board") held on 24 March 2011 and was announced in the China Securities Journal,  Shanghai Securities News, Securities Daily and the website of the Shanghai  Stock  Exchange  (www.sse.com.cn)  on 25 March 2011.

As at the end of  2011, 33 (including13 Boeing 737-300 aircraft, 8 Boeing 757-200 aircraft,3 Boeing 767-300 aircraft  and 9 Boeing 747-400 aircraft) out of the 49 aircraft mentioned above have not been  disposed of.  The selling prices  of such 33 aircraft are expected to be lower than those previously  expected and  have shown signs of impairment  over  the impairment provided for in 2010.

In accordance with the "Accounting Standards for Business Enterprises No. 8 - Impairment of Assets"  and "International  Financial Reporting Standards No. 36 - Impairmentof Assets" of the People's Republic of China, if an indicator of assets impairment exists, such as "the current market price of an asset falls,  and its decrease is obviously  higher than  the  expected drop over time or from normal use" and "any evidence in the internal report of an enterprise shows that the economic performance of an asset has been or will be worse than expected", which indicates an asset may be impaired,  the recoverable amount of that asset should be estimated. Impairment provision should be made based on the difference  between the recoverable amount of the asset and its book value.

Accordingly, the Company has engaged a third-party professional appraisal firm to evaluate the recoverable amount of the 33 aircraft mentioned above, the spare engines and the related assets proposed to  be disposed of.  The evaluation  results showed that the recoverable amount of part of the abovementioned assets were lower than their book value,  and as such, the Company will, for the year of 2011,  make impairment provisions for the shortfall  between the  recoverable amount and book value in the amount of RMB1.373 billion, including an impairment provision of RMB65 million for inventories - flight equipmentsand an impairment provision of RMB1.308 billion for fixed assets - aircraft  and engines.

In addition, Air China Cargo Co., Ltd., a subsidiary of the Company, has also conducted an impairment test for 6 B747-400F aircraft and the related assets proposed to be disposed of. According to the valuation report issued by a third-party appraisal firm, an impairment provision of RMB316 million will be made.

Based on the foregoing, the Company will make an aggregated impairment provision of RMB1.689 billion in the consolidated statements for 2011, of which RMB550 million is recognized in the financial statements for the third quarter of 2011 based on estimated calculations and RMB1.139 billion is recognized for the fourth quarter of 2011.

At the twenty-second meeting of the third session of the Board held on 12 March 2012, the "Resolution  regarding  Consideration and Approval on Provision for Impairmentof the Aircraft and Related Assets  Proposed  to be  Disposed of" was passed and the Company was approved to make an impairment  provision of RMB1.373  billion  in 2011 for the aircraft and related assets proposed to be disposed of, with an aggregated impairment provision of RMB1.689 billion in the consolidated statements for 2011.

The Company believes that the impairment provisions made for the above assets would not have any significant  impact on the financialposition and operating results of the Group for the year of 2011.

By order of the Board

Rao Xinyu

Board Secretary

Beijing, the PRC, 12 March 2012

 

END

 

 

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