Discloseable Transaction: Acq
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AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 00753)
DISCLOSEABLE TRANSACTION:
PURCHASE OF 10 AIRBUS 320-SERIES AIRCRAFT
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On 30 July 2010, Shenzhen Airlines and AIE entered into the Airbus Aircraft Purchase Agreement with Airbus Company, pursuant to which Shenzhen Airlines has agreed to purchase 10 Airbus 320-series aircraft from Airbus Company. Shenzhen Airlines is a subsidiary of the Company.
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The Transaction constitutes a discloseable transaction of the Company under the Listing Rules. |
AIRBUS AIRCRAFT PURCHASE AGREEMENT
On 30 July 2010, Shenzhen Airlines and AIE entered into the Airbus Aircraft Purchase Agreement with Airbus Company, pursuant to which Shenzhen Airlines has agreed to purchase 10 Airbus 320-series aircraft from Airbus Company. Shenzhen Airlines is a subsidiary of the Company.
The details of the Transaction are summarized as follows:
Date of the Transaction:
30 July 2010
Parties to the Transaction:
(i) Shenzhen Airlines, as the purchaser, the principal business activity of which is air passenger, air cargo and airline-related services;
(ii) AIE, as the import agent for the Company; and
(iii) Airbus Company, as the vendor, one of whose principal business activity is aircraft manufacturing.
The Company confirms that, to the best of the Directors' knowledge, information and belief having made all reasonable enquiry, Airbus Company and each of the ultimate beneficial owner of Airbus Company are third parties independent of the Company and its connected persons (as defined in the Listing Rules).
Aircraft to be acquired:
Airbus Aircraft, i.e. 10 Airbus 320-series aircraft
Consideration:
The aircraft basic price comprises the airframe price, optional features prices and engine price. The aircraft basic price of the Airbus Aircraft in aggregate is approximately US$814 million (equivalent to approximately HK$6,324.78 million) (price quoted from open market as at 2010). The aircraft price is subject to price escalation by applying a formula. Airbus Company has granted to Shenzhen Airlines significant price concessions with regard to the Airbus Aircraft. These will take the form of credit memoranda which may be used by Shenzhen Airlines towards the final price payment of the Airbus Aircraft or may be used for the purpose of purchasing goods and services from Airbus Company. Such credit memoranda were determined after arm's length negotiations between the parties and as a result, the actual consideration for the Airbus Aircraft is lower than the aircraft basic price mentioned above.
The Transaction was negotiated and entered into in accordance with customary business practice. The Directors confirm that the extent of the price concessions granted to Shenzhen Airlines in the Transaction is comparable with the price concessions that the Company had obtained in the previous aircraft purchase entered into between the Company and Airbus Company as set out in the announcement of the Company dated 10 February 2010. The Company believes that there is no material impact of the price concessions obtained in the Transaction on the unit operating cost of the Company's fleet. It is normal business practice of the global airline industry to disclose the aircraft basic price, instead of the actual price, for aircraft acquisitions. Disclosure of the actual consideration will result in the loss of the significant price concessions and hence a significant negative impact on the Company's cost for the Transaction and will therefore not be in the interest of the Company and the Company's shareholders as a whole. The Company has applied to the Stock Exchange for a waiver from strict compliance of Rule 14.58(4) of the Listing Rules in respect of disclosure of the actual consideration of the Airbus Aircraft.
As the Transaction and the purchase of 20 Airbus 320-series aircraft by the Company dated 10 February 2010 (the "Previous Airbus Transaction") were entered into within a 12 month period and were both with Airbus Company, pursuant to Rule 14.22 of the Listing Rules, their transaction amounts should be aggregated for the purpose of determining relevant percentage ratios under Rule 14.07 of the Listing Rules. The aggregated transaction amount is approximately US$2,442 million (HK$18,974 million).
As the relevant percentage ratio under Rule 14.07 of the Listing Rules for the Transaction with aggregated transaction amount with the Previous Airbus Transaction is above 5% but less than 25%, the Transaction constitutes a discloseable transaction and is therefore not subject to approval by the Company's shareholders under the Listing Rules.
Payment and delivery terms:
The aggregate consideration for the acquisition of Airbus Aircraft is payable by cash in instalments. Shenzhen Airlines is expecting to take delivery of the Airbus Aircraft in stages from 2012 to 2013.
Source of funding:
The Transaction will be funded through cash generated from Shenzhen Airlines' business operations, commercial bank loans and other financing instruments of Shenzhen Airlines.
REASONS FOR AND BENEFITS OF THE TRANSACTION
The Transaction will expand the fleet capacity of the Group. If not taking into account the adjustments that may be made to the fleet based on marketing condition and the aging of the fleet, the Transaction will strengthen the fleet capacity of the Group with an increase of 2% based on available tonne kilometers of the Group as at 31 December 2009. In particular, the Transaction will mainly expand the fleet capacity of Shenzhen Airlines in south China. The Group expects the Airbus Aircraft will deliver more cost-efficient performance and provide more comfortable services to passengers.
The Directors believe that the terms of the Transaction are fair and reasonable and in the interests of the shareholders of the Company as a whole.
DEFINITION
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
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"AIE"
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Air China Import and Export Co., Ltd., a company incorporated in the People's Republic of China and a wholly-owned subsidiary of the Company |
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"Airbus Aircraft"
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10 Airbus 320-series aircraft to be purchased by Shenzhen Airlines pursuant to the Airbus Aircraft Purchase Agreement |
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"Airbus Aircraft Purchase Agreement" |
the aircraft purchase agreement dated 30 July 2010 pursuant to which Shenzhen Airlines has agreed to purchase and Airbus Company has agreed to sell the Airbus Aircraft |
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"Airbus Company" |
Airbus S. A. S., a company incorporated in Toulouse, France |
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"Company"
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Air China Limited, a company incorporated in the People's Republic of China, whose H shares are listed on the Hong Kong Stock Exchange as its primary listing venue and on the Official List of the UK Listing Authority as its secondary listing venue, and whose A shares are listed on the Shanghai Stock Exchange |
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"Director(s)" |
the director(s) of the Company |
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"Group" |
The Company and its subsidiaries |
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"Hong Kong Stock Exchange" |
The Stock Exchange of Hong Kong Limited |
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"Listing Rules"
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The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
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"Shenzhen Airlines"
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Shenzhen Airlines Limited, a company incorporated under the laws of the People's Republic of China with limited liability, and its primary business activities is air passenger, air cargo and airline-related services |
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"Transaction"
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the acquisition by the Company of the Airbus Aircraft pursuant to the Airbus Aircraft Purchase Agreement
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By order of the Board
Air China Limited
Huang Bin Tam Shuit Mui
Joint Company Secretaries
Beijing, the PRC, 30 July 2010
As at the date of this announcement, the directors of the Company are Mr. Kong Dong, Ms. Wang Yinxiang, Mr. Wang Shixiang, Mr. Cao Jianxiong, Mr. Christopher Dale Pratt, Mr. Cai Jianjiang, Mr. Fan Cheng, Mr. Hu Hung Lick, Henry*, Mr. Zhang Ke*, Mr. Jia Kang* and Mr. Fu Yang*.
* Independent non-executive director of the Company
This information is provided by RNS
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