CONTINUING CONNECTED TRANSACT
Air China Ld
21 November 2005
The Stock Exchange of Hong Kong Limited takes no responsibility
for the contents of this announcement, makes no representation as
to its accuracy or completeness and expressly disclaims 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: 753)
CONTINUING CONNECTED TRANSACTIONS
Reference is made to the CNAC Announcement dated 16 November 2005
relating to, inter alia, the Continuing Connected Transactions
entered into between Air Macau and relevant associates of STDM.
Air Macau is a 51% indirectly-owned subsidiary of CNAC. CNAC is an
approximately 68.4% directly-owned subsidiary of the Company,
whose shares are listed on the Stock Exchange. Therefore, the
Continuing Connected Transactions entered into between Air Macau
and associates of STDM will also constitute continuing connected
transactions for the Company under Chapter 14A of the Listing
Rules.
As the applicable percentage ratios for each of the Continuing
Connected Transactions under the Listing Rules is less than 2.5%,
each of the Continuing Connected Transactions is only subject to
the reporting, announcement and annual review requirements under
Rules 14A.45 to 14A.47 and Rules 14A.37 to 14A.40 and is exempt
from the independent shareholders' approval requirement of Chapter
14A of the Listing Rules.
Set out below are the transactions between Air Macau and
associates of STDM that constitute continuing connected
transactions of the Company for the purpose of the Listing Rules:
(A) AIRPORT FEES TRANSACTION
In Air Macau's normal and ordinary course of business, it incurs a
number of airport charges on a daily basis for the use of
facilities and services at the Macau International Airport. These
airport charges, which are approved and published by the Macau
Government, include, inter alia, landing charge, loading charge,
parking charge, airport charge, loading bridge charge, and other
ancillary fees.
Both the airport charges and the airport fees are invoiced and
collected by ADA, a 51% owned subsidiary of CNACAL which in turn
is wholly-owned subsidiary of CNACG, on behalf of MIAC, the
developer and owner of Macau International Airport. Since CNAC and
CNACAL are both subsidiaries of CNAH, ADA is a connected person of
CNAC. Furthermore, STDM, which has a 14% shareholding interest in
Air Macau, has an approximately 33% shareholding in MIAC and
hence, MIAC is also a connected person of CNAC. As a result, the
payment of the airport charges and the airport fees will
constitute continuing connected transactions for CNAC under the
Listing Rules. As CNAC is a non-wholly owned subsidiary of the
Company, the payment of the airport charges and the airport fees
will also constitute continuing connected transactions for the
Company under Chapter 14A of the Listing Rules.
The Company will make further announcement in respect of the
Airport Fees Transaction.
(B) CATERING SERVICES
For in-flight meals to its passengers, Air Macau entered into the
Catering Services Agreement on 1 November 2001 with MCS.
Pursuant to the Catering Services Agreement, Air Macau purchased
meals from MCS, an associate of STDM. Since STDM has a 14%
shareholding interest in Air Macau and MCS is an associate of
STDM, MCS is a connected person of CNAC and therefore a connected
person of the Company. Since MCS is the only provider of in-flight
meals in Macau, Air Macau has continued to purchase in-flight
meals from MCS pursuant to the agreement on normal commercial
terms which was determined on an arm's length basis.
The consideration of the catering services was determined by
reference to the amounts payable for the purchase of in-flight
meals by Air Macau from MCS in the past, the relevant amount for
the three years ended 31 December, 2002, 2003 and 2004 were
HK$43,965,000, HK$40,637,000 and HK$41,199,000, respectively. Such
transaction amounts were within the relevant cap amount granted to
CNAC for the relevant financial year.
The Catering Services Agreement continues to remain valid until 31
October 2006 unless otherwise terminated according to its terms
and conditions.
The Board has considered and proposed that the cap for the annual
volume of the transactions contemplated under the Catering
Services Agreement for each of the three years ending 31 December,
2005, 2006 and 2007 shall be HK$65 million, HK$75 million and
HK$95 million, respectively. Reference is also made to the
corresponding cap proposed by the board of CNAC in the CNAC
Announcement. As the aggregate annual consideration payable for
the catering services by Air Macau represents less than 2.5% of
the applicable percentage ratios of the Company, the Catering
Services Agreement is, according to Rule 14A.34(1), only subject
to the reporting, announcement and annual review requirements set
out in Listing Rules 14A.45 to 14A.47 and Rules 14A.37 to 14A.40
and is exempt from the independent shareholders' approval
requirement of Chapter 14A of the Listing Rules.
The Catering Services Annual Cap are determined by reference to
previous transactions and figures which are published in CNAC's
annual reports in 2002 to 2004 and the growth in passenger uplift
as projected by the management of Air Macau.
REASONS FOR ENTERING INTO THE CONTINUING CONNECTED TRANSACTIONS
(A) Airport Charges and Airport Fees
The Airport Fees Transaction relates to payment of fees to ADA/
MIAC in Macau and is in CNAC and its subsidiaries' ordinary course
of business in compliance with the laws and regulations of Macau.
As Air Macau is an airliner based in Macau and the Macau
International Airport is the only airport in Macau, it is in the
ordinary course of business of Air Macau to use the facilities and
services and the license certain floor space at the Macau
International Airport. Air Macau entered into the Airport Fees
Transaction for the purpose of operating its business.
(B) Catering Services Agreement
Since MCS is the only provider of in-flight meals in Macau, Air
Macau, in its ordinary course of business, is required to purchase
in-flight meals from MCS. Air Macau entered into the Catering
Services Agreement for the purpose of operating its business.
The Board, including the independent non-executive directors of
the Company, consider that the transactions contemplated under the
Catering Services Agreement
BUSINESS OF THE GROUP
The Group is principally engaged in the provision of air
passenger, air cargo and airline-related services.
INFORMATION ON CONNECTED PERSONS
MIAC is the owner of the Macau International Airport.
MCS is principally engaged in the provision of inflight catering
services and other related inflight food and beverage services.
CNAC is an investment holding company with investments principally
engaged in the provision of air transportation services through
Dragonair and Air Macau, airline catering services, airport ground
handling services and logistics services.
CNACG is an investment holding company with investments
principally engaged in travel services, air cargo terminals and
other aviation related businesses.
CNAH is principally engaged in the business of investment
holding in airline-related businesses, provision of financial
services, hotel operations, construction, media and advertising.
DEFINITIONS
'ADA' Administration of Airports Limited, a
51% owned subsidiary of CNAC (Macau)
Aviation Limited (a wholly-owned
subsidiary of CNACG)
'Air Macau' Air Macau Company Limited, a company
incorporated in Macau with limited
liability and a 51% indirectly-owned
subsidiary of CNAC
'Airport Fees Transaction' The continuing connected transactions
between Air Macau and MIAC in relation
to the airport charges and airport
fees as described in the section
headed '(A) Airport Fees Transaction'
in this announcement
'Associate(s)' has the meaning ascribed thereto in
the Listing Rules
'Board' the board of directors of the Company
'CNACAL' CNAC (Macau) Aviation Limited, a
wholly-owned subsidiary of CNACG
'CNAC' China National Aviation Company
Limited, a company incorporated under
the laws of Hong Kong with limited
liability, whose shares are listed on
the Stock Exchange and which is an
approximately 68.4% directly-owned
subsidiary of the Company
'CNAC Announcement' the announcement of CNAC dated 16
November 2005 relating to, inter alia,
the Continuing Connected Transactions
entered into between Air Macau and
relevant associates of STDM
'CNACG' China National Aviation Corporation
(Group) Limited, a company
incorporated in Hong Kong with limited
liability which is wholly owned by
CNAH and a substantial shareholder of
the Company
'CNAH' China National Aviation Holding
Company, a state-owned enterprise
incorporated under the laws of the PRC
and the ultimate controlling
shareholder of the Company
'Company' Air China Limited, a joint stock
limited company incorporated under the
laws of the PRC with limited
liability, whose H shares are listed
on the Stock Exchange and the London
Stock Exchange plc
'Continuing Connected the continuing connected transactions
Transactions' between Air Macau and associates of
STDM and CNACG as described in this
announcement
'Dragonair' Hong Kong Dragon Airlines Limited, an
airline operator incorporated in Hong
Kong with limited liability with
approximately 43.29% of its share
capital owned by CNAC
'Group' the Company and its subsidiaries
'Hong Kong' the Hong Kong Special Administrative
Region of the PRC
'HK$' Hong Kong dollars, the lawful currency
of Hong Kong
'Listing Rules' The Rules Governing the Listing of
Securities on The Stock Exchange of
Hong Kong Limited
'Macau' The Macau Special Administrative
Region of the PRC
'Macau Government' The Government of Macau
'MCS' Macau Catering Services Company
Limited, a company incorporated in
Macau and an associate of STDM
'MIAC' Macau International Airport Company
'Catering Services Annual The proposed new annual cap of
Cap' transaction amount for the
transactions contemplated under the
Catering Services Agreement for the
period from 1 January 2005 to 31
December 2007 as described in the
section headed '(B) Catering Services'
in this announcement
'PRC' The People's Republic of China
'STDM' Sociedade de Turismo e Diversoes de
Macau, a company incorporated in Macau
'Stock Exchange' The Stock Exchange of Hong Kong
Limited
By Order of the Board
Air China Limited
Zheng Baoan Li Man Kit
Joint Company Secretaries
Beijing, 18 November 2005
As at the date of this announcement, the directors of the Company
are Messrs Li Jiaxiang, Kong Dong, Wang Shixiang, Yao Weiting,
David Muir Turnbull, Ma Xulun, Cai Jianjiang, Fan Cheng, Hu Hung
Lick, Henry*, Wu Zhipan* and Zhang Ke*.
* Independent non-executive director of the Company
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