PURCHASE OF 24 AIRBUS 320
Air China Ld
15 June 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)
MAJOR TRANSACTION: PURCHASE OF 24 AIRBUS 320-series AIRCRAFT
The Company hereby announces that on 14 June 2006, the Company and
AIE entered into the Airbus Aircraft Purchase Agreement with
Airbus Company, pursuant to which the Company has agreed to
purchase 24 Airbus 320-series aircraft from Airbus Company.
CNAHC, which currently directly owns approximately 51.16% of the
total issued share capital of the Company, has approved the
Transaction. CNAHC does not have any interest in the Transaction
other than as a shareholder of the Company.
The Transaction constitutes a major transaction of the Company
under the Listing Rules. 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.
AIRBUS AIRCRAFT PURCHASE AGREEMENT
On 14 June 2006 the Company and AIE entered into the Airbus
Aircraft Purchase Agreement with Airbus Company, pursuant to which
the Company has agreed to purchase 24 Airbus 320-series aircraft
from Airbus Company. The Airbus Aircraft Purchase Agreement was
entered into pursuant to a framework agreement entered into
between Airbus Company and the China Aviation Supplies Import and
Export Group Corporation on 5 November 2005 (the 2005 Framework
Agreement).
The details of the Transaction are summarized as follows:
Date of the Transaction:
14 June 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) 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 independent third parties and not connected
persons (as defined in the Listing Rules) of the Company.
Aircraft to be acquired:
Airbus Aircraft, i.e. 24 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 USD1,744.08 million (HKD13,563.19
million). The aircraft price is subject to price escalation by
applying a formula. Airbus Company has granted to the Company
significant price concessions with regard to the Airbus Aircraft.
These will take the form of credit memoranda which may be used by
the Company towards the purchase of the Airbus Aircraft, goods and
services or may be used towards the final price payment of the
Airbus Aircraft. 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. Taking into account all the factors
relating to the purchase of aircraft by the Company, including the
market condition, the type, number and delivery schedule of
aircraft being purchased, and the terms of the 2005 Framework
Agreement, the extent of the price concessions granted to the
Company 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 on 26
January 2005 (the 2005 Aircraft Purchase). The Company believes
that there is no material difference between the effect of the
price concessions obtained in the Transaction and the 2005
Aircraft Purchase on the Company's operating costs taken 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 relevant percentage ratio under Rule 14.07 of the Listing
Rules for the Transaction is above 25% but less than 100%, the
Transaction constitutes a major transaction and is therefore
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. The Company is expecting to
take delivery of the Airbus Aircraft in stages from 2007 to 2010.
Source of funding:
The Transaction will be funded through cash generated from the
Company's business operations, commercial bank loans and other
financing instruments of the Company.
REASONS FOR AND BENEFITS OF THE TRANSACTION
The Airbus 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 Airbus Aircraft will deliver more
cost-efficient performance and provide more comfortable services
to passengers.
Although the Airbus Aircraft was purchased with other aircrafts
under a package acquisition plan, which is coordinated by the
NDRC, the decision to purchase the Airbus 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
CNAHC currently directly owns approximately 51.16% of the total
issued share capital of the Company. Each of CNAHC and its
associates (as defined in the Listing Rules) does not have any
interest in the Transaction other than as a shareholder of the
Company (where applicable). No shareholder of the Company is
required to abstain from voting if the Company was to convene a
general meeting for the approval of the Transaction. CNAHC has
approved the Transaction by way of a written approval pursuant to
Rule 14.44 of the Listing Rules. 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
'Airbus Aircraft' 24 Airbus 320-series aircraft, which includes
Airbus 319, Airbus 320 and Airbus 321, to be
purchased by the Company pursuant to the Airbus
Aircraft Purchase Agreement
'Airbus Aircraft the aircraft purchase agreement dated 14 June 2006
Purchase pursuant to which the Company has agreed to
Agreement' purchase and Airbus Company has agreed to sell the
Airbus Aircraft
'Airbus Company' Airbus S.A.S., a company incorporated in Toulouse,
France
'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
'CNAHC' China National Aviation Holding Company, a company
incorporated in the People's Republic of China
'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 Airbus
Aircraft pursuant to the Airbus Aircraft Purchase
Agreement
By order of the Board
Air China Limited
Zheng Baoan Li Man Kit
Joint Company Secretaries
Beijing, 14 June 2006
As at the date of this announcement, the Directors of the Company
are Messrs Li Jiaxiang, Kong Dong, Wang Shixiang, Yao Weiting,
Christopher Dale Pratt, 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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