PURCHASE OF 10 BOEING 737
Air China Ld
13 February 2006
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 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)
DISCLOSEABLE TRANSACTION: PURCHASE OF 10 BOEING 737 AIRCRAFT
On 17 January 2006 the Company and AIE entered into the Boeing Aircraft Purchase
Agreement with Boeing Company, pursuant to which the Company has agreed to
purchase 10 Boeing 737-800 aircraft from Boeing Company.
The Transaction constitutes a discloseable transaction of the Company under the
Listing Rules.
BOEING AIRCRAFT PURCHASE AGREEMENT
On 17 January 2006 the Company and AIE entered into the Boeing Aircraft Purchase
Agreement with Boeing Company, pursuant to which the Company has agreed to
purchase 10 Boeing 737-800 aircraft from Boeing Company.
The details of the Transaction are summarized as follows:
Date of the Transaction:
17 January 2006
Parties to the Transaction:
(i) the Company, 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) Boeing 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, Boeing Company and
each of the ultimate beneficial owner of Boeing Company are independent third
parties and not connected persons (as defined in the Listing Rules) of the
Company.
Aircraft to be acquired:
Boeing Aircraft, i.e. 10 Boeing 737-800 aircraft
Consideration:
The aircraft basic price comprises the airframe price, optional features prices
and engine price. The aircraft basic price of the Boeing Aircraft in aggregate
is US$655.2 million. The airframe price is subject to price escalation by
applying a formula. Boeing has granted to the Company price concessions with
regard to the Boeing Aircraft. These will take the form of credit memoranda
which may be used by the Company towards the purchase of the Boeing Aircraft or
spare parts, goods and services or may be used towards the final delivery
invoice payment of the Boeing Aircraft. Such credit memoranda were determined
after arm's length negotiations between the parties and as a result, the
actual consideration for the Boeing Aircraft is lower than the aircraft basic
price mentioned above.
The Boeing Aircraft Purchase Agreement was signed pursuant to an umbrella
agreement entered into between Boeing Company and the China Aviation Supplies
Import and Export Group Corporation in November 2005. The aircraft acquisition
agreement dated 8 August 2005 (the 2005 Aircraft Purchase) entered into between
the Company and Boeing Company was signed pursuant to an umbrella agreement
entered into between Boeing Company and the airline companies including the
Company in January 2005. The purchase of the Boeing Aircraft was not in
contemplation at the time of the 2005 Aircraft Purchase. Accordingly, the
Transaction and the 2005 Aircraft Purchase are not part of the same series of
transactions and are not treated as if they were one transaction and these
transactions are not required to be aggregated for the relevant classification
of the Transaction pursuant to Rule 14.22. As the relevant percentage ratio
under Rule 14.07 of the Listing Rules for the Transaction is more than 5% but
less than 25%, the Transaction on its own constitutes a discloseable
transaction, and is therefore not subject to approval by the Company's
shareholders under the Listing Rules.
The current disclosure on the aggregate value of aircraft basic price is under
review by the Company and the Hong Kong Stock Exchange. The Company may make
further disclosure in respect of the disclosure of the consideration for the
Boeing Aircraft by way of an announcement.
Payment and delivery terms:
The aggregate consideration for the acquisition of Boeing Aircraft is payable by
cash in instalments. The Company is expecting to take delivery of the Boeing
Aircraft in stages from end 2007 to end 2008.
Source of funding:
The Transaction will be funded through cash generated from the Company's
business operations, commercial bank loans, other debt instruments of the
Company and subject to the completion of the proposed A share issue as set out
in the announcement by the Company dated 9 February 2006, the proceeds from the
A share issue.
REASONS FOR AND BENEFITS OF THE TRANSACTION
The Boeing Aircraft will expand the fleet capacity of the Company and will
principally reinforce Beijing's position as a transportation hub and increase
frequency of flights, departing originally from Beijing, of a number of key
domestic flight courses. The Company expects the Boeing Aircraft will deliver
more cost-efficient performance and provide more comfortable services to
passengers.
Although the Boeing Aircraft was purchased with other aircrafts under a package
acquisition plan, which is coordinated by the NDRC, the decision to purchase the
Boeing Aircraft was made independently by the Company. The negotiations under
the acquisition plan were done as a package to increase bargaining power.
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.
FURTHER INFORMATION
The Company shall, pursuant to the Listing Rules, dispatch a circular containing
the information required under the Listing Rules in relation to the Transaction
within 21 days after the publication of this announcement.
DEFINITION
In this announcement, unless the context otherwise requires, the following terms
shall have the following meanings:
'AIE' Air China Group Import and Export Trading Co., a
company incorporated in the People's Republic of
China and a wholly-owned subsidiary of the Company
'Boeing Aircraft' 10 Boeing 737-800 aircraft to be purchased by the
Company pursuant to the Boeing Aircraft Purchase
Agreement
'Boeing Aircraft the aircraft purchase agreement dated 17 January
Purchase 2006 pursuant to which the Company has agreed to
Agreement' purchase and Boeing Company has agreed to sell
the Boeing Aircraft
'Boeing Company' Boeing Company, a company incorporated in Delaware
of the United States
'Company' Air China Limited, a company incorporated in the
People's Republic of China with primary listing on
The Stock Exchange of Hong Kong Limited and
secondary listing on the Official List of the UK
Listing Authority
'Director(s)' the director(s) of the Company
'Hong Kong Stock The Stock Exchange of Hong Kong Limited
Exchange'
'Listing Rules' The Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited
'NDRC' the National Development and Reform Commission of
the People's Republic of China
'Transaction' the acquisition by the Company of the Boeing
Aircraft pursuant to the Boeing Aircraft Purchase
Agreement
By order of the Board
Air China Limited
Zheng Baoan Li Man Kit
Joint Company Secretaries
Beijing, 10 February 2006
As at the date of this announcement, the Directors of the Company are Messrs Li
Jiaxiang, Kong Dong, Wang Shixiang, Yao Weiting, Ma Xulun, Cai Jianjiang, Fan
Cheng, Hu Hung Lick, Henry*, Wu Zhipan* and Zhang Ke*.
* Independent non-executive Director of the Company
This information is provided by RNS
The company news service from the London Stock Exchange
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