Doc re. CONTINUING CONNECTED
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 whatsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 753)
CONTINUING CONNECTED TRANSACTIONS
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Reference is made to the 2006 Circular in relation to the continuing connected transactions of the Company. At the 2006 EGM, the Independent Shareholders approved certain non-exempt continuing connected transactions of the Company and their relevant annual caps for the three years ended 31 December 2009. The Company expected the continuing connected transactions set out in the 2006 Circular will continue to be conducted after 31 December 2009, therefore the Company will continue to comply with Chapter 14A of the Listing Rules for the continuing connected transactions to be conducted in the next three years (i.e. from 1 January 2010 to 31 December 2012), including further disclosure of information in this announcement and to seek Independent Shareholders' approval for the Non-exempt Continuing Connected Transaction (including relevant proposed caps). |
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On 27 October 2009, the Board approved the continuing connected transactions as set out in this announcement, the annual caps of certain continuing connected transactions for each of the three years ending 31 December 2010, 2011 and 2012. The Company will seek Independent Shareholders' approval to the Non-exempt Continuing Connected Transaction and their respective proposed annual cap for each of the three years ending 31 December 2010, 2011 and 2012 in accordance with the Hong Kong Listing Rules. |
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Except for the Non-exempt Continuing Connected Transaction, as each of the Percentage Ratios (other than the profits ratio) of the other continuing connected transactions (excluding the de minimis continuing connected transactions) set out in this announcement, on an annual basis, is higher than 0.1% and less than 2.5%, they therefore fall under Rule 14A.34 of the Hong Kong Listing Rules. Accordingly, these continuing connected transactions are subject to the reporting and announcement requirements set out under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules, but are exempt from the requirements of independent shareholders' approval under Chapter 14A of the Hong Kong Listing Rules. |
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The Board (including the independent non-executive directors of the Company) considers that the abovementioned continuing connected transactions have been conducted on normal commercial terms or on terms no less favourable than those available to independent third parties and were entered into on a continuing and regular basis and in the ordinary and usual course of business of the Company, are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and the annual caps set for each of the future three years ending 31 December 2010, 2011 and 2012 for the abovementioned continuing connected transactions are fair and reasonable. |
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A circular containing, among other things, (i) details of the Non-exempt Continuing Connected Transaction; (ii) a letter from an independent financial adviser to the Independent Board Committee and the Independent Shareholders containing its advice on the Non-exempt Continuing Connected Transaction; and (iii) the recommendation of the Independent Board Committee in respect of the Non-exempt Continuing Connected Transaction, will be despatched to Shareholders in accordance with the Hong Kong Listing Rules as soon as practicable. |
1. INTRODUCTION
Reference is made to the 2006 Circular in relation to the continuing connected transactions of the Company. At the 2006 EGM, the Independent Shareholders approved certain non-exempt continuing connected transactions of the Company and their relevant annual caps for the three years ended 31 December 2009. The Company expected the continuing connected transactions set out in the 2006 Circular will continue to be conducted after 31 December 2009. Therefore, the Company will continue to comply with Chapter 14A of the Listing Rules for the continuing connected transactions to be conducted in the next three years (i.e. from 1 January 2010 to 31 December 2012), including further disclosure of information in this announcement and to seek Independent Shareholders' approval to the Non-exempt Continuing Connected Transaction (including relevant proposed caps).
On 27 October 2009, the Board approved the continuing connected transactions set out in this announcement and the relevant annual caps for each of them for the three years ending 31 December 2010, 2011 and 2012. The Company will seek Independent Shareholders' approval to the Non-exempt Continuing Connected Transaction and its proposed annual caps for each of the three years ending 31 December 2010, 2011 and 2012 in accordance with the Hong Kong Listing Rules.
2. PARTIES AND CONNECTION OF THE PARTIES
The Company, whose principal business activity is air passenger, air cargo and airline-related services, has been conducting continuing connected transactions with the following parties:
• China National Aviation Holding Company ("CNAHC") and its associates (excluding the Company) ("CNAHC Group")
CNAHC is a substantial shareholder of the Company and is therefore a connected person of the Company as defined under the Hong Kong Listing Rules. CNAHC is primarily engaged in managing the state-owned assets of CNAHC and the equity it holds in various companies.
• China National Aviation Media and Advertisement Co., Ltd. ("CNAMC")
CNAMC is a wholly-owned subsidiary of CNAHC and is therefore a connected person of the Company as defined under the Hong Kong Listing Rules. CNAMC is primarily engaged in media and advertising business.
• China National Aviation Tourism Company ("CNATC")
CNATC is a wholly-owned subsidiary of CNAHC and is therefore a connected person of the Company as defined under the Hong Kong Listing Rules. CNATC is primarily engaged in tourism.
• China Aircraft Services Limited ("CASL")
CASL is a 40%-owned subsidiary of CNACG, a substantial shareholder of the Company, and is therefore a connected person of the Company as defined under the Hong Kong Listing Rules. CASL is primarily engaged in providing aircraft line maintenance, cabin cleaning and ground support services at Hong Kong International Airport.
• China National Aviation Finance Co., Ltd. ("CNAF")
CNAF is a 75.54% held subsidiary of CNAHC and is therefore a connected person of the Company as defined under the Hong Kong Listing Rules. CNAF is primarily engaged in providing financial services to the members of CNAHC Group.
• Lufthansa and its associates ("Lufthansa Group")
Lufthansa holds 40% equity interest in and is a substantial shareholder of Aircraft Maintenance and Engineering Corporation ("Ameco"), a subsidiary of the Company, and is therefore a connected person of the Company under the Hong Kong Listing Rules. Lufthansa is primarily engaged in passenger traffic, logistics, MRO Services, catering, leisure travel, etc.
3. CONTINUING CONNECTED TRANSACTIONS EXEMPT FROM INDEPENDENT SHAREHOLDERS' APPROVAL
3.1 Media and Advertising Services
The Company entered into an advertising services framework agreement (the "Advertising Services Framework Agreement") on 27 October 2009, with CNAMC.
Description of transaction: pursuant to the Advertising Services Framework Agreement, CNAMC will have the following rights:
• an exclusive right to distribute the in-flight reading materials of the Company;
• an exclusive operation right of the specific media of the Company, including the flight boarding passes, aircraft seat pillow sheets, paper cups, in-flight entertainment system and flight schedules;
• a right to be commissioned to purchase in-flight entertainment programmes (which may include advertising content) from independent third parties or produce such programmes on its own;
• a right to develop and use the media of the Company and receive effective support and assistance from the Company in the course of the sale of advertisements. The advertising business cooperation which may be conducted from time to time between the Company and CNAMC includes (1) advertisements produced by CNAMC or for which CNAMC acts as agent and media developed by CNAMC for the Company (including outdoor advertisements on properties owned by the Company, ground broadcasting programmes (at ticket offices and on airport shuttles), the international e-commerce network check-in system and ticket envelops (including air ticket envelops and boarding pass envelops)) and (2) advertisements designed, produced and published by CNAMC, as commissioned by the Company directly or through public tender; and
• a right to receive advertising fees at market price in respect of advertising design and image promotion conducted by CNAMC for the Company under the Company's commissioning.
As a consideration, CNAMC agrees to:
• pay the Company RMB23.81 million, RMB25 million and RMB26.25 million, respectively, for each of the three years ending 31 December 2010, 2011 and 2012 in respect of the exclusive operation rights of the specific media of the Company, and according to the annual budget of the Company, provide the Company at nil charge with sufficient in-flight media (other than in-flight entertainment programmes), including in-flight publications, boarding passes, pillow sheets, flight schedules, and paper cups that meet the Company's requirements;
• pay the Company 20% of any revenue from any new advertising media of the Company which is not mentioned in the Advertising Services Framework Agreement but proposed to be developed by CNAMC on the basis of case by case discussion.
The Company agrees to pay immediately and directly to the independent entertainment programmes providers the purchasing price for those in-flight entertainment programmes provided or purchased by CNAMC for the Company. In the event that the relevant entertainment programmes are produced by CNAMC at the request of the Company, the Company will pay the corresponding production costs and expenses to CNAMC.
The term of the Advertising Services Framework Agreement is from 1 January 2010 to 31 December 2012.
Reasons for such transaction: The Directors believe that it is in the best interest of the Company to enter into above transactions with CNAMC because:
• media and advertising business is not the core competency of the Company while CNAMC has extensive experience in in-flight advertising operation and has a proven network of advertising sponsors to draw upon; and
• CNAMC, being a company having engaged in the aviation media business for a long time, has a better understanding of the corporate culture and the brand of the Company and has certain advantages in entertainment programmes production and advertising agency business.
Historical Amounts and Proposed Caps:
The annual cap for the aggregate amount including in-flight entertainment programmes production fees and advertising agency fees, etc paid by the Company to CNAMC for each of the two years ended 31 December 2009 is RMB60 million, respectively. For each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009, the actual aggregate amount paid by the Company to CNAMC including in-flight entertainment production fees and advertising agency fees was approximately RMB12.53 million, RMB20.36 million and RMB6.49 million, respectively.
It is proposed that for each of the three years ending 31 December 2010, 2011 and 2012, the annual cap for the aggregate amount paid by the Company to CNAMC including in-flight entertainment production fees and advertising agency fees, etc shall be RMB60 million per annum.
The annual amount payable by CNAMC to the Company under the Advertising Services Framework Agreement for each of the future three years ending 31 December 2010, 2011 and 2012 is expected to fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules, therefore such transaction will be exempt from the announcement and independent shareholders' approval requirement for connected transactions.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap or the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Amount paid by the Company to CNAMC under the Advertising Services Framework Agreement |
N/A* |
RMB60 million |
RMB60 million |
RMB12.53 million |
RMB20.36 million |
RMB6.49 million |
RMB43 million |
RMB60 million |
RMB60 million |
RMB60 million |
* For the year of 2007, the maximum aggregate annual amount to be paid by the Company to CNAMC was expected to fall below the de minimus threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore no annual cap was set.
Basis for such caps:
The Company's service development strategy aims at continuously enhancing its service quality. Therefore, the Company will gradually increase its investment in the purchase and production of entertainment programmes as well as its investment in advertising on an annual basis. CNAMC will participate more in the Company's advertising promotion work in the next three years through tender. In addition, due to the increased number of aircraft of the Company, the need for entertainment programmes will increase correspondingly.
3.2 Property Leasing
The Company entered into a properties leasing agreement (the "Properties Leasing Agreement") with CNAHC on 27 October 2009.
Description of transaction: Pursuant to the Properties Leasing Agreement, the Company will lease from CNAHC Group a number of properties for various uses including as business premises, offices and storage facilities.
The Company will lease to CNAHC Group a number of properties for various uses including as business premises and offices.
The rent payable under the Properties Leasing Agreement will be determined in accordance with the relevant PRC regulations or market rates and by entering into a specific properties leasing agreement. The annual increase in rental rate is expected not to exceed 5%.
The term of the Properties Leasing Agreement is from 1 January 2010 to 31 December 2012.
Reasons for such transaction: In the ordinary course of business, the Company has entered into similar property leasing transactions with various parties including both connected persons and independent third parties.
Historical Amounts and Proposed Caps:
The annual cap for the aggregate amount of rent paid by the Company to CNAHC Group for each of the three years ended 31 December 2009 is RMB55 million, RMB85 million and RMB95 million, respectively. The actual aggregate amount of rent paid by the Company to CNAHC Group for each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009 was approximately RMB53.14 million, RMB70.75 million and RMB35.10 million, respectively.
It is proposed that the annual cap for the aggregate amount of rent payable by the Company to CNAHC Group for each of the three years ending 31 December 2010, 2011 and 2012 shall be RMB140 million, RMB147 million and RMB154.35 million, respectively.
The annual aggregate amount of rent payable by CNAHC Group to the Company for each of the next three years ending 31 December 2010, 2011 and 2012 are expected to fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules, therefore such transaction will be exempt from the announcement and independent shareholders' approval requirements for connected transactions.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Rent paid by us to CNAHC Group under the Properties Leasing Agreement |
RMB55 million |
RMB85 million |
RMB95 million |
RMB53.14 million |
RMB70.75 million |
RMB35.10 million |
RMB90 million |
RMB140 million |
RMB147 million |
RMB154.35 million |
Basis for such caps:
As at the date hereof, the Company and its subsidiaries have leased a total of 15 premises with an aggregate area of 41,489.35 sq.m. from CNAHC Group. The Company expects the rent level will rise in the next three years.
Due to the operation needs of the southwest branch of the Company, the Company expects to lease a property from CNATC starting within the fourth quarter of 2009 and intends to lease an office premise of approximately 25,000 sq.m in Chengdu from CNACD in 2010. Based on our needs for operation and development, the area to be leased from CNAHC Group will increase in the next three years. In arriving at the annual caps, the Company has taken into account the possible 5% overall annual rental increase and based on the rental expenditure of RMB70.75 million for the year of 2008. It is estimated the rental expenditure for 2010 will not exceed RMB140 million, with subsequent increase of 5% per year.
3.3 Tourism Co-operation Services
The Company entered into a tourism services cooperation agreement (the "Tourism Cooperation Agreement") with CNATC on 27 October 2009.
Description of transaction: Pursuant to the Tourism Cooperation Agreement, the Company has agreed to provide the following services to CNATC:
• Package tours services: the Company and CNATC will design and the Company will sell the competitive "Air Tickets and Hotel" product combining (i) discounted airline tickets for certain routes offered by the Company and (ii) accommodation at hotels owned and operated by CNATC at preferential group rates. Out of the proceeds from package tours, the Company will pay CNATC for the hotel fee portion of the packages.
• Reciprocal frequent-flyer programme ("FFP") co-operation services: CNATC will join the Company's FFP under which our Companion card members are encouraged to stay at CNATC's hotels by receiving mileage credits for such stay. As consideration, CNATC will pay us the equivalent value represented by those mileage credits at market rates.
• Commercial charter flight services: the Company will provide commercial charter services to customers procured by CNATC at market rates.
Pursuant to the Tourism Cooperation Agreement, CNATC agreed to provide the following services to the Company:
• FFP co-operation services: under the FFP, our frequent flyers may redeem their mileage credits for discounted stay at CNATC's hotels, and the Company will make payment settlement with CNATC for the discount portion of such redemption according to similar pricing arrangements with our other FFP partners.
• Hotel accommodation services: CNATC will provide temporary hotel accommodation services to the Company's employees on duty and passengers affected by our flight delays, for which services the Company will pay hotel accommodation fees to CNATC as scheduled and at the actual amount incurred.
• Aviation tourist services with special features including but not limited to a newly launched service of ground transportation for passengers of two classes at market rates.
The term of the Tourism Co-operation Agreement is from 1 January 2010 to 31 December 2012.
Reasons for the transaction: In the ordinary course of business, the Company has entered into similar transactions with various parties including both connected persons and independent third parties. CNATC, as a member of CNAHC Group, is specialized in tourism product development and tourism services, and has extensive experience in these areas and has hotel resources. In light of the business characteristics and market advantages of the Company and CNATC, it is expected that through such cooperation and effective resource consolidation, the Company and CNATC can both benefit from resources sharing and achieve a win-win situation.
Historical Amounts and Proposed Caps:
The annual cap for the aggregate amount paid by CNATC to the Company for each of the three years ended 31 December 2009 is RMB59.2 million, RMB69.04 million and RMB80.84 million, respectively. For the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009, the actual aggregate amount paid by CNATC to the Company was approximately RMB47.81 million, RMB29.09 million and nil, respectively.
It is proposed that the annual cap for the aggregate amount to be paid by CNATC to the Company for tourism cooperation for each of the three years ending 31 December 2010, 2011 and 2012 shall be RMB69 million per annum.
For each of the next three years ending 31 December 2010, 2011 and 2012, it is expected that the aggregate annual amount to be paid by the Company to CNATC will fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules; therefore, such transaction will be exempt from the announcement and independent shareholders' approval requirements for connected transactions.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Amount to be paid by CNATC to us under the Tourism Co- operation Services Agreement |
RMB59.2 million |
RMB69.04 million |
RMB80.84 million |
RMB47.81 million |
RMB29.09 million |
nil |
RMB10 million |
RMB69 million |
RMB69 million |
RMB69 million |
Basis for such caps:
In arriving at the above caps, the Directors have considered the historical figures for the same type of transactions and have taken into account the positive prospects of such transactions.
Since the second half of 2008, the Company suspended the cooperation on commercial charter flight with CNATC, which resulted in substantial decrease in the actual transaction amount generated from tourism cooperation and nil transaction amount in the first six months of 2009. However, the Company is in discussion with CNATC regarding commercial charter flight cooperation in 2010 and thereafter, and both parties have shown their intention to resume charter flight cooperation for the less popular routes and to gradually restore their cooperation to the 2006 level. Based on the charter flight cooperation income for each of the years between 2006 and 2008 as well as the revenue generated from FFP and tour package cooperation, the Company estimates that the amount to be paid by CNATC to the Company for each of the years between 2010 to 2012 will not exceed RMB69 million.
3.4 Sales Agency Services of Airline Tickets and Cargo Space
The Company entered into a Sales Agency Services Framework Agreement (the "Sales Agency Services Framework Agreement") with CNAHC on 27 October 2009.
Description of transaction: Pursuant to the Sales Agency Services Framework Agreement, certain subsidiaries of CNAHC acting as the Company's sales agents ("Sales Agency Companies") will:
• procure purchasers for the Company's air tickets and cargo spaces on a commission basis; or
• purchase air tickets (other than domestic air tickets) and cargo spaces from the Company and resell such air tickets and cargo spaces to end customers.
As for the air passenger agency services, the Company will continue to comply with the existing fee standards for air passenger sales agency services before the relevant competent authority promulgates administrative regulations on the fee range allowed for air passenger sales agency services. After the promulgation of such administrative regulations, the Company will consult with the Sales Agency Companies on a fair and voluntary basis and determine the agency service fee standards within the stipulated floating range. In addition, the Company and the Sales Agency Companies may agree on specific sales targets and the corresponding incentive plans for achieving such targets to the extent permitted by law and in accordance with the industry practice.
Regarding the air cargo agency services, the Company and the Sales Agency Companies will discuss and determine the applicable transportation prices based on the prevailing market prices, and the Sales Agency Companies may formulate the transportation prices charged to its customers (including the prices for extended services offered to its customers) based on the aforesaid transportation prices, with differences to be retained as commissions. In addition, the Company and the Sales Agency Companies may agree on specific sales targets and the corresponding price discounts for achieving such sales targets in accordance with the industry practice.
The term of the Sales Agency Services Framework Agreement is from 1 January 2010 to 31 December 2012.
Reasons for the transaction: The Company has entered into similar transactions with various parties including both connected persons and independent third parties in its ordinary course of business. Air transportation sales agency is a highly marketized business. In view of the long-term amicable sales agency cooperation relationship between the Company and the Sales Agency Companies as well as the rich experience and sizable customer base of the latter in the air transportation agency business, the Company is willing to continue such cooperation on air transportation sales agency with the Sales Agency Companies.
Historical Amounts and Proposed Caps:
For each of the three years ended 31 December 2009, the annual cap for the aggregate sales of airline tickets and cargo space by the Company to CNAHC Group for resale to end customers in relation to the sales agency services is RMB357 million, RMB408 million and RMB459 million, respectively. For each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009, the actual annual aggregate sales of airline tickets and cargo space by the Company to CNAHC Group for resale to end customers in relation to the sales agency services were approximately RMB246.64 million, RMB192.59 million and RMB50.71 million, respectively.
It is proposed that the annual cap for the aggregate sales of airline tickets and cargo space by the Company to CNAHC Group for resale to end customers for each of the three years ending 31 December 2010, 2011 and 2012 shall be RMB270 million, RMB324 million and RMB388.8 million, respectively.
For each of the three years ending 31 December 2010, 2011 and 2012, the aggregate annual amount of agency commission to be paid by the Company to CNAHC Group is expected to fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules; therefore, such transaction will be exempt from the announcement and independent shareholders' approval requirement for connected transactions.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Sales of airline tickets and cargo space to CNAHC Group |
RMB357 million |
RMB408 million |
RMB459 million |
RMB246.64 million |
RMB192.59 million |
RMB50.71 million |
RMB220 million |
RMB270 million |
RMB324 million |
RMB388.8 million |
Basis for such caps:
In arriving at the above caps, the Directors have considered the historical transaction amount and the expected growth of such transactions.
The bellyhold cargo space for Air China Cargo will increase with the expansion of the fleet of the Company (including Air China Cargo). As a result of the rapid expansion of our business in the past three years, the total number of aircraft of the Company (including Air China Cargo) increased from 220 in 2007 to 243 in 2008, and is expected to reach 248 at the end of 2009. The fleet of the Company (including Air China Cargo)is expected to expand at an annual rate of around 10% from 2010 to 2012.
Sale revenue of cargo space decreased from 2007 to 2009 because (1) Air China Cargo acquired shareholding of certain related parties engaged in air cargo agency services which resulted in the reduction of the business volume of connected transactions, and (2) the deteriorating market conditions had an adverse impact on the air transportation industry. Nevertheless, as the global economy begins to revive, the unit air transportation price is expected to rise in the future. Meanwhile, Air China Cargo is further integrating its businesses and increasing its transportation capacity. As such, based on the sale revenue of airline tickets and cargo space by the Company to CNAHC Group for resale to end customers of RMB192.59 million in 2008, it is expected that such sales revenue in 2010 will not exceed RMB270 million and will increase at an annual rate of 20% thereafter.
3.5 Comprehensive Services
The Company entered into a comprehensive services agreement (the "Comprehensive Services Agreement") with CNAHC on 27 October 2009.
Description of transaction: Pursuant to the Comprehensive Services Agreement:
• Certain wholly-owned and controlled companies of CNAHC engaged in ancillary production and supply services in relation to air transportation business ("Ancillary Business Companies"), provided that such Ancillary Business Companies have obtained the relevant qualifications and certification, will primarily provide the following services to the Company:
(i) supply of various items for in-flight services;
(ii) manufacturing and repair of aviation-related ground equipment and vehicles;
(iii) cabin decoration and equipment;
(iv) properties management services;
(v) warehousing services;
(vi) airline catering services; and
(vii) printing of air tickets and other publications.
• The Company accepts the commission of CNAHC and provide welfare-logistics services for CNAHC's retired employees.
• The charges of the services provided by the Ancillary Business Companies to the Company shall not exceed the prevailing market rates (including the tender quotes) and the prices of the similar services they provide to independent third parties. If no prevailing market rate is available, a fair and reasonable price should be adopted through arm's length negotiation between the parties. The management charges payable by CNAHC to the Company for the welfare-logistics services shall be settled at a rate of 4% of the actual aggregate welfare expense paid to such retired employees as confirmed by CNAHC.
The term of the Comprehensive Services Agreement is from 1 January 2010 to 31 December 2012.
Reasons for the transaction: For the services to be provided by CNAHC Group, the Directors believe that CNAHC Group has special strengths that independent parties do not possess, including (1) knowledge of the aviation industry; (2) a proven track record of quality and timely service; and (3) the sites, where services are provided by CNAHC Group, are generally near to the site of the Company, and therefore CNAHC Group is in a position to offer efficient services. In light of these factors, the Directors believe that it is in the best interest of the Company to enter into the above transactions with CNAHC Group.
Historical Amounts and Proposed Caps:
For each of the three years ended 31 December 2009, the annual cap for the aggregate amount paid by the Company to CNAHC Group under the Comprehensive Services Agreement is RMB80 million, RMB650 million and RMB750 million, respectively. The actual aggregate amount paid by the Company to CNAHC Group for each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009 under the Comprehensive Services was approximately RMB79.21 million, RMB369.98 million and RMB192.386 million, respectively.
It is proposed that the annual cap for the aggregate amount to be paid by the Company to CNAHC Group under the Comprehensive Services Agreement for each of the three years ending 31 December 2010, 2011 and 2012 shall be RMB784 million, RMB862 million and RMB862 million, respectively.
For each of the three years ending 31 December 2010, 2011 and 2012, the aggregate annual amount to be paid by CNAHC to the Company for the provision of welfare-logistics services to the retired employees is expected to fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules, therefore such transaction will be exempt from the announcement and independent shareholders' approval requirements for connected transactions.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Amount to be paid by the Company to CNAHC Group under the Comprehensive Services Agreement |
RMB80 million |
RMB650 million |
RMB750 million |
RMB79.21 million |
RMB369.98 million |
RMB192.386 million |
RMB700 million |
RMB784 million |
RMB862 million |
RMB862 million |
Basis for such caps:
In arriving at the above caps, the Directors have considered the historical transaction amount for the same type of transactions and have taken into account the expected growth of the Company's air passenger services in the next few years.
The transaction volume increased during the past three years primarily because CNACG acquired CNAC's subsidiaries, Beijing Air Catering and Southwest Air Catering, in June 2008, which have been the main suppliers of the Company's in-flight food and beverage. The catering transaction amount of Beijing Air Catering and Southwest Air Catering from January to June 2009 accounted for 85% of the total comprehensive services transaction amount. It is expected that the actual transaction amount generated by the Company in respect of its businesses under the Comprehensive Services Agreement in 2009 will not exceed RMB700 million.
As the Company has been continually increasing its transportation capacity and flights, and another company in which CNACG has recently invested will start to provide catering services to the Company in one or two years, the transaction amount under the Comprehensive Services Agreement is expected to increase consequently.
3.6 Subcontracting of Charter Flight Services
The Company entered into a government charter flight service framework agreement (the "Charter Flight Service Framework Agreement") with CNAHC on 27 October 2009.
Description of transaction: Pursuant to the Charter Flight Service Framework Agreement, CNAHC shall resort to the Company's charter flight services so as to fulfil the government charter flight assignment. The Company's hourly rate of the charter flight service fee will be calculated on the basis of the following formula:
Hourly rate = Total cost per flight hour x (1 + 6.5%)
Total cost per flight hour includes direct costs and indirect costs.
The term of the Charter Flight Service Framework Agreement is from 1 January 2010 to 31 December 2012.
Reasons for the transaction: As the national flag carrier of China, the Company has historically provided charter flights for government related travel services to State leaders, government delegations, national sports teams and cultural envoys. The Company has gained significant brand recognition by being the designated government charter flight carrier. Based upon the hourly rate formula under the Charter Flight Service Framework Agreement, it is expected that the Company will generate good revenue from such transaction.
Historical Amounts and Proposed Caps:
For each of the three years ended 31 December 2009, the annual cap for aggregate amount paid by CNAHC to the Company in respect of the charter flight services is RMB700 million, RMB812 million and RMB917 million, respectively. The actual aggregate amount paid by CNAHC to the Company in respect of the charter flight services for each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009 was approximately RMB448.75 million, RMB453.27 million and RMB341.004 million, respectively.
It is proposed that the annual cap for the aggregate amount of revenue derived from the Charter Flight Service Framework Agreement for each of the three years ending 31 December 2010, 2011 and 2012 shall be RMB750 million, RMB825 million and RMB900 million, respectively.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Amount of revenue derived from the Charter Flight Service Framework Agreement |
RMB700 million |
RMB812 million |
RMB917 million |
RMB448.75 million |
RMB453.27 million |
RMB341.004 million |
RMB700 million |
RMB750 million |
RMB825 million |
RMB900 million |
Basis for such caps:
In arriving at the above caps, the Directors considered the historical and estimated transaction amount as set out in the table above of the same type of transactions and the following factors:
• The difference between the actual transaction amount of the government charter flight service and the cap for 2008 was caused by various factors including the 2008 Beijing Olympic Games. Nevertheless, as China's influence in the world is growing, the government charter flight services are expected to increase on a continuous basis during the period from 2010 to 2012; and
• Uncertainties such as the future jet fuel price could lead to an increase of flight-related costs.
3.7 Continuing Connected Transactions between the Company and the Lufthansa Group
Description of transaction: The Company has entered into various transactions under separate agreements with different periods, some of which are more than three years, with Lufthansa Group in the ordinary course of its business, including, among others:
• MRO Services provided by the Company to the Lufthansa Group;
• mutual provision of catering services;
• mutual provision of ground handling services in China and Germany;
• mutual provision of ticket sales agency services;
• airline code sharing arrangement under which the actual carrier's flights can be marketed under the airline designator code of the partner carrier and revenues earned from these arrangements are allocated between the parties based on negotiated terms according to airline industry standards;
• special prorate arrangement under which a carrier agrees to accept passengers from another carrier and receive payment directly from that carrier; and
• other airline co-operation arrangements between the Lufthansa Group and the Company.
The above transactions have been entered into on normal commercial terms based on arm's length negotiations.
Reasons for the transaction: The Company has entered into various transactions with Lufthansa Group in the ordinary course of the Company's business. Lufthansa is one of the leading airlines worldwide and is one of the founding members of the Star Alliance, which is the largest and most awarded airline alliance in the world. Through the co-operation with Lufthansa Group, the Company could further enhance the quality and attractiveness of its products and services.
Historical Amounts and Proposed Caps:
For each of the three years ended 31 December 2009, the annual cap for the aggregate amount of all expenses paid by the Company to Lufthansa Group is RMB775.20 million, RMB900 million and RMB1,017 million, respectively. The actual aggregate amount of all expenses paid by the Company to Lufthansa Group for each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009 was approximately RMB703.19 million, RMB549.45 million and RMB354.31 million, respectively.
For each of the three years ended 31 December 2009, the annual cap for the aggregate amount of all expenses paid by Lufthansa Group to the Company is RMB592.8 million, RMB687.7 million and RMB777 million, respectively. The actual aggregate amount of all expenses paid by Lufthansa Group to the Company for each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009 were approximately RMB591.49 million, RMB567.97 million and RMB276.23 million, respectively.
It is proposed that for each of the three years ending 31 December 2010, 2011 and 2012: (i) the annual cap for the aggregate amount of all expenses to be paid by the Company to Lufthansa Group for each of the three years ending 31 December 2010, 2011 and 2012 shall be RMB780 million, RMB858 million and RMB943.8 million, respectively; and (ii) the annual cap for the aggregate amount of all expenses to be paid by Lufthansa Group to the Company shall be RMB770 million, RMB847 million and RMB931.7 million, respectively.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Amount to be paid by the Company to Lufthansa Group |
RMB775.2 million |
RMB900 million |
RMB1,017 million |
RMB703.19 million |
RMB549.45 million |
RMB354.31 million |
RMB700 million |
RMB780 million |
RMB858 million |
RMB943.8 million |
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Amount to be paid by the Lufthansa Group to Company |
RMB592.8 million |
RMB687.7 million |
RMB777 million |
RMB591.49 million |
RMB567.97 million |
RMB276.23 million |
RMB700 million |
RMB770 million |
RMB847 million |
RMB931.7 million |
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Basis for such caps:
In arriving at the above caps, the Directors have considered (i) the historical and estimated transaction amounts as set out in the table above; and (ii) the discussion with Lufthansa Group about its planned flight schedules between Germany and China; and (iii) the Company's business plan about increased flight routes to Germany.
As the fleet of the Company (including Air China Cargo) is expected to expand at an annual rate of around 10% from 2010 to 2012, and number of routes to Europe especially Germany will continue to increase, it is expected that the aggregate amount paid by the Company to Lufthansa Group in 2010 will not exceed RMB780 million, and will increase at an annual rate of 10% afterwards. The aggregate amount paid by Lufthansa Group to the Company in 2010 will not exceed RMB770 million, and will increase at an annual rate of 10% afterwards.
3.8 Line Maintenance and Other Ground Services
The Company entered into a standard ground handling agreement (the "Standard Ground Handling Agreement") on 17 April 2004 with CASL, in which a 40% interest is owned by CNACG, for a term of one year and is renewable, which was recently renewed for one year in January 2009. Pursuant to the Agreement, CASL shall provide line maintenance and other ground services to the Company at the Hong Kong International Airport. Such services shall be charged at prevailing market rates.
As the Company entered into a framework agreement (the "CNACG Framework Agreement") dated 26 August 2008 in respect of the relevant agreements between the Company and CNACG Group. The CNACG Framework Agreement applies to the transactions entered into under the relevant agreements during the three years ending 31 December 2010. The transactions refer to those entered into between the Company (including its subsidiaries and joint ventures) (as one party) and CNACG Group companies (as the other party) in respect of ground handling services and engineering services, management services as well as the other services that the relevant parties may agree to undertake pursuant to the CNACG Framework Agreement (excluding the transactions contemplated under the framework agreements entered into by CNAHC Group). CASL is one of the members of the CNACG Group as defined in the Agreement. The transactions set forth in the Standard Ground Handling Agreement may also fall within the scope of CNACG Framework Agreement. Accordingly, the Company will cease to treat the Standard Ground Handling Agreement as a separate continuing connected transaction after 31 December 2009, but to include it in the CNACG Framework Agreement; and the transaction amount incurred under the Standard Ground Handling Agreement will also be included in the annual caps for the connected transactions, which have been set in the CNACG Framework Agreement.
4. NON-EXEMPT CONTINUING CONNECTED TRANSACTION
4.1 Financial Services
The Company entered into a financial services agreement (the "Financial Services Agreement") with CNAF on 27 October 2009.
Description of transaction: Pursuant to the Financial Services Agreement, CNAF has agreed to provide the Company with a range of financial services including the following:
• deposit services;
• loan and finance leasing services;
• negotiable instrument and letter of credit services;
• trust loan and trust investment services;
• underwriting services for debt issuances;
• intermediary and consulting services;
• guarantee services;
• settlement services;
• internet banking services;
• bills and payment collection services;
• insurance agency services; and
• other services provided by CNAF under the approval of the China Banking Regulatory Commission ("CBRC").
Pursuant to the Financial Services Agreement, CNAF is currently paid to provide the Company with bills acceptance services, letter of credit services, guarantee services, internet banking services, finance leasing services, discounting services and ticket collection services and charges fees incurred thereon. Such fees are charged in accordance with the relevant fees standard (if any) stipulated by the People's Bank of China or the CBRC. In addition to complying with the foregoing, the fees charged by CNAF to the Company for financial services of similar type shall not be higher than those generally charged by commercial banks from the Company and those charged by CNAF to other group members.
With respect to the deposit and loan services, both parties agree:
• The interest rate applicable to the Company for its deposits with CNAF shall not be lower than the minimum interest rate specified by the People's Bank of China for deposits of similar type. In addition, the interest rate for the Company's deposits with CNAF shall not be lower than the interest rate for similar type of deposits placed by other members of CNAHC Group with CNAF, and shall not be lower than the interest rate for similar type of deposit services provided by commercial banks to the Company generally; and
• The interest rate for loans (including other credit business) granted to the Company by CNAF shall not be higher than the maximum interest rate specified by the People's Bank of China for loans of similar type. In addition, the interest rate for loans granted to the Company by CNAF shall not be higher than the interest rate for similar type of loans granted by CNAF to other members of CNAHC Group or higher than those for similar type of loans granted by commercial banks to the Company generally.
The Company agrees that it will under the same conditions accord priority to and use the financial services provided by CNAF. CNAF has treated the Company as its major client and undertook to provide financial services of the same kind under conditions no less favourable than those provided by CNAF to other members of CNAHC Group and those provided by other financial institutions to the Company at the same time.
In order to ensure the security of the capital, CNAF is not allowed, at any time, to make use of the deposits of the Company other than making external loans. The prohibited use of the deposits of the Company includes, but not limited to, investment activities in equity securities and corporate bonds. CNAF, as a non-bank financial institution approved by the CBRC, shall strictly comply with the regulatory targets and other requirements of the CBRC to conduct its operation and business, establish effective and complete internal control and risk management systems and set up the credit review committee and investment committee in order to effectively manage risks and ensure the safety of all capital. If the Company intends to inspect the accounts of CNAF, CNAF shall make arrangement for such an inspection within 10 days thereof. Pursuant to provisions of the Measures on Administrating the Financial Companies of Enterprise Groups, in the emergent event that CNAF encounters financial difficulties in making payments, CNAHC, as the controlling shareholder of the Company, shall increase the capital of CNAF accordingly to meet the actual need to overcome such financial difficulties in making payments.
The unpaid services provided by CNAF to the Company include settlement services and financial information services ("Unpaid Services").
In addition to the specific services set out in the Financial Services Agreement, CNAF is also exploring and developing other licensed financial services and will provide new financial services to other members of CNAHC Group as and when appropriate ("New Financial Services").
If CNAF charges fees for the Unpaid Services and New Financial Services during the period in which the Financial Services Agreement remains in force, such fees charged by CNAF shall comply with the standards stipulated by the People's Bank of China or the CBRC for services of similar type and shall not be higher than those charged by commercial banks to the Company for similar type of financial services and those charged by CNAF to other members of CNAHC Group.
The term of the Financial Services Agreement is from 1 January 2010 to 31 December 2012.
Reasons for the transaction: The Directors believe that it is in the best interest of the Company to enter into the above transaction with CNAF having taken into account the following factors:
• in respect of transactions between the Company and members of CNAHC Group, CNAF is able to provide more efficient settlement service compared with independent third party banks;
• CNAF is able to provide safe, convenient, fast, comprehensive and personalized financial services to the Company. With the improving professionalism of CNAF and its enhancing financial services, it is fully qualified for providing relevant services to inter-companies (in CNAHC Group). As a professional financial institution in CNAHC Group, it acts more actively to protect the interest of the Company than external institutions. A good cooperative relationship has been established between CNAF and the related departments of the Company over the years which make their cooperation more efficient; and
• since CNAF is 19.31% owned by the Company, the Company can ultimately benefit from the business development of CNAF.
Historical Amounts and Proposed Caps:
The annual cap for the aggregate amount of certain transactions between the Company and CNAF for each of the three years ended 31 December 2009 is as follows:
• Maximum daily balance of deposits (including accrued interest) placed by the Company with CNAF is RMB2.5 billion, RMB2.5 billion and RMB2.5 billion, respectively; and
• Maximum daily balance of loans and other credit services (including accrued interest) granted by CNAF to the Company is RMB2.5 billion, RMB2.5 billion and RMB2.5 billion, respectively.
The actual annual aggregate amount of certain transactions between the Company and CNAF for each of the two years ended 31 December 2007 and 31 December 2008 and the first six months of 2009 was as follows:
• Actual amounts of the maximum daily balance of deposits (including accrued interest) placed by the Company with CNAF were RMB1,053.07 million, RMB1,499.68 million and RMB2,269 million, respectively; and
• Actual amounts of the maximum daily outstanding balance of loans and other credit services (including accrued interest) granted by CNAF to the Company were RMB317.44 million, RMB1,111.02 million and RMB906 million, respectively.
It is proposed that the annual cap for the aggregate amount of certain transactions between the Company and CNAF for each of the three years ending 31 December 2010, 2011 and 2012 shall be as follows:
• Maximum daily balance of deposits (including accrued interest) placed by the Company with CNAF shall be RMB7 billion; and
• Maximum daily balance of loans and other credit services (including accrued interest) granted by CNAF to the Company shall be RMB3 billion.
The aggregate annual fees to be paid by the Company to CNAF for other financing services for each of the three years ending 31 December 2010, 2011 and 2012 is expected to fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules, therefore such transactions will be exempt from the announcement and independent shareholders' approval requirement for connected transactions.
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Historical Caps |
Historical Figures |
Future Caps |
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Transaction |
Annual cap for the year ended 31 December 2007 |
Annual cap for the year ended 31 December 2008 |
Annual cap for the year ended 31 December 2009 |
Actual Annual amount for the year ended 31 December 2007 |
Actual Annual amount for the year ended 31 December 2008 |
Unaudited Historical amount for the period from 1 January to 30 June 2009 |
Estimated annual amount for the year ending 31 December 2009 |
Annual cap for the year ending 31 December 2010 |
Annual cap for the year ending 31 December 2011 |
Annual cap for the year ending 31 December 2012 |
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Financial Services (deposit) |
RMB2.5 billion |
RMB2.5 billion |
RMB2.5 billion |
RMB1,053.07 million |
RMB1,499.68 million |
RMB2,269 million |
RMB2.5 billion |
RMB7 billion |
RMB7 billion |
RMB7 billion |
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Financial Services (loan and other credit services) |
RMB2.5 billion |
RMB2.5 billion |
RMB2.5 billion |
RMB317.44 million |
RMB1,111.02 million |
RMB906 million |
RMB2.5 billion |
RMB3 billion |
RMB3 billion |
RMB3 billion |
Basis for such caps:
In arriving at the caps for financial services to be provided by CNAF, the Directors have taken into account the historical and estimated transaction amounts set out in the above table, and the expected business growth of the Company including the continuous expansion of the fleet size of the Company (including Air China Cargo). In 2006, the Company (including Air China Cargo) operated a fleet of 207 aircraft. Subsequently, the operated fleet increased from 220 aircraft in 2007 to 243 aircraft in 2008. It is expected that the Company (including Air China Cargo) will operate a fleet of 248 aircraft as at the end of 2009. The fleet size is expected to continue to expand at a rate of around 10% annually from 2010 to 2012.
The Company expects that cash flow requirement will increase as a result of its business growth. At the same time, the Company expects that the cash inflow will also increase. Maintaining the above annual caps will make relevant financial arrangements to be carried out between the Company and CNAF with higher flexibility. In addition, with the expansion of the operational scale, the Company's financing through the issue of medium term notes reached RMB6 billion in 2009 and it is expected that the Company will continue to expand its financing scale in the coming years.
All in all, the Company's demand for financial services will continue to increase, including: (1) increasing demands for deposits arising from the gradual increase of cash flows and (2) increasing demands for loans due to the expansion of the fleet size and the air routes network of the Company.
5. LISTING RULES IMPLICATIONS
5.1 The Financial Services Agreement between the Company and CNAF falls under Rule 14A.35 of the Hong Kong Listing Rules. Such transaction are subject to reporting and announcement requirements set out under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules and are required to be approved by the Independent Shareholders in accordance with the requirements set out under Rules 14A.48 at the Company's EGM.
5.2 Except for the Non-exempt Continuing Connected Transaction, as each of the Percentage Ratios (other than the profits ratio) of the other continuing connected transactions (excluding the de minimis continuing connected transactions) set out in this announcement above, on an annual basis, is higher than 0.1% and less than 2.5%, they therefore fall under Rule 14A.34 of the Hong Kong Listing Rules. Accordingly, these continuing connected transactions are subject to the reporting and announcement requirements set out under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules, but are exempt from the requirements of Independent Shareholders' approval under Chapter 14A of the Hong Kong Listing Rules.
5.3 The Board (including the independent non-executive directors of the Company) considers that the abovementioned continuing connected transactions have been conducted on normal commercial terms or on terms no less favourable than those available to independent third parties and were entered into in the ordinary and usual course of business of the Company, are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and the annual cap for each of the future three years ending 31 December 2010, 2011 and 2012 for the abovementioned continuing connected transactions are fair and reasonable.
5.4 A circular containing, among other things, (i) details of the Non-exempt Continuing Connected Transaction; (ii) a letter from an independent financial adviser to the Independent Board Committee and the Independent Shareholders containing its advice on the Non-exempt Continuing Connected Transaction; and (iii) the recommendation of the Independent Board Committee in respect of the Non-exempt Continuing Connected Transaction, will be despatched to Shareholders in accordance with the Hong Kong Listing Rules as soon as practicable.
6. PRC LAW IMPLICATIONS
6.1 Pursuant to the Listing Rules of the Shanghai Stock Exchange, the following agreements shall be approved or ratified by the Shareholders at the EGM:
(a) Construction Project Management Agreement;
(b) Advertising Services Framework Agreement;
(c) Properties Leasing Agreement;
(d) Tourism Cooperation Agreement;
(e) Sales Agency Services Framework Agreement;
(f) Comprehensive Services Agreement;
(g) Charter Flight Service Framework Agreement; and
(h) Financial Services Agreement.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
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"2006 Circular" |
the circular issued by the Company on 1 December 2006 to its Shareholders in respect of certain continuing connected transactions |
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"2006 EGM" |
the Company's extraordinary general meeting held on 28 December 2006 |
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"Air China Cargo" |
Air China Cargo Co., Ltd, a company with limited liability incorporated under the laws of People's Republic of China and with 76% of its registered capital owned by the Company as at the date of this announcement |
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"Board" |
the board of Directors of the Company |
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"CNAC" |
China National Aviation Company Limited, a company incorporated in Hong Kong and a subsidiary of the Company as at the date of this announcement |
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"CNACD" |
China National Aviation Construction and Development Company, a wholly-owned subsidiary of CNAHC |
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"CNACG" |
China National Aviation Corporation (Group) Limited, a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of CNAHC as at the date of this announcement. CNACG is primarily engaged in managing the holding company of CNACG Group and the state-owned assets and equity in various companies |
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"CNACG Group" |
CNACG and its associates |
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"Company" |
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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"Construction Project Management Agreement" |
the framework agreement for assigning management of basic construction project entered into by the Company and CNACD on 27 October 2009. The annual amount payable by the Company under the Construction Project Management Agreement for each of the three years ending 31 December 2010, 2011 and 2012 is expected to fall below the de minimis threshold as stipulated under Rule 14A.33(3) of the Hong Kong Listing Rules. Accordingly, such transaction will be exempt from announcement and independent shareholders' approval requirements for connected transactions |
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"Directors" |
the directors of the Company |
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"EGM" |
the Company's extraordinary general meeting to be held to seek Independent Shareholders' approval to the Non-exempt Continuing Connected Transaction (including relevant proposed caps) |
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"Beijing Air Catering" |
Beijing Air Catering Co., Ltd., a company incorporated under the laws of the PRC |
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"Hong Kong Listing Rules" |
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
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"Hong Kong Stock Exchange" |
The Stock Exchange of Hong Kong Limited |
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"Independent Board Committee" |
a board committee comprising Mr. Hu Hung Lick, Henry, Mr. Zhang Ke, Mr. Jia Kang and Mr. Fu Yang, all being the independent non-executive directors of the Company |
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"Independent Shareholders" |
the independent shareholders of the Company |
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"MRO Services" |
aircraft maintenance, repair and overhaul services |
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"Non-exempt Continuing Connected Transaction" |
the transactions under the Financial Services Agreement between the Company and CNAF |
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"Percentage Ratios" |
the percentage ratios set out in Rule 14.07 of the Hong Kong Listing Rules, i.e. "assets ratio", "profits ratio", "revenue ratio", "consideration ratio" and "equity capital ratio" |
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"PRC" |
The People's Republic of China, excluding, for the purpose of this announcement only, Hong Kong, Macau and Taiwan |
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"RMB" |
Renminbi, the lawful currency of the PRC |
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"Shareholders" |
shareholders of the Company |
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"Southwest Air Catering" |
Southwest Air Catering Company Limited, a company incorporated under the laws of the PRC |
By order of the Board
Air China Limited
Huang Bin Tam Shuit Mui
Joint Company Secretaries
Beijing, 27 October 2009
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. Chen Nan Lok, Philip, 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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