Purchase of Aircraft
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.
AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 00753)
MAJOR TRANSACTION:
PURCHASE OF 15 BOEING 787-9 AIRCRAFT
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On 31 August 2010 the Company and AIE entered into the Boeing Aircraft Supplemental Agreement with Boeing Company, pursuant to which the Company has agreed to purchase 15 Boeing 787-9 aircraft from Boeing Company to replace the 15 Boeing 787-8 aircraft as agreed to be purchased by the Company from Boeing Company under the 2005 Aircraft Purchase Agreement.
The Transaction constitutes a major transaction of the Company under the Listing Rules. The Company expects to dispatch a circular containing the information required under the Listing Rules in relation to the Transaction within 15 business days after the publication of this announcement. An extraordinary general meeting of the Company will be convened to approve the Transaction. |
Boeing AIRCRAFT Supplemental AGREEMENT
Reference is made to the circular of the Company dated 30 August 2005 in relation to the Company's purchase of 15 Boeing 787-8 aircraft pursuant to the 2005 Aircraft Purchase Agreement.
On 31 August 2010, the Company and AIE entered into the Boeing Aircraft Supplemental Agreement with Boeing Company, pursuant to which the Company has agreed to purchase 15 Boeing 787-9 aircraft from Boeing Company to replace the 15 Boeing 787-8 aircraft as agreed to be purchased by the Company from Boeing Company under the 2005 Aircraft Purchase Agreement.
The details of the Transaction are summarised as follows:
Date of the Transaction:
31 August 2010
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 owners of Boeing Company are third parties independent of the Company and its connected persons (as defined in the Listing Rules).
Aircraft to be acquired:
Boeing Aircraft, i.e. 15 Boeing 787-9 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 approximately US$3,190 million (equivalent to approximately HK$24,808 million) (price quoted from open market as at July 2008). The aircraft price is subject to price escalation by applying a formula. Boeing Company has granted to the Company significant price concessions with regard to the Boeing Aircraft. These concessions will take the form of credit memoranda which may be used by the Company towards the final price payment of the Boeing Aircraft or may be used for the purpose of purchasing goods and services from Boeing Company. 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 Transaction was negotiated and entered into in accordance with customary business practice. The Directors confirm that 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 Boeing Company as set out in the announcement of the Company dated 25 June 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 Boeing Aircraft.
As the Previous 2010 Boeing Aircraft Purchase and the Transaction were entered into within a 12 month period and were both with Boeing 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$4,588 million (HK$35,679 million).
As the relevant percentage ratio under Rule 14.07 of the Listing Rules for the Transaction with aggregated transaction amount with the Previous 2010 Boeing Aircraft Purchase 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 Boeing Aircraft is payable by cash in instalments. The Company is expecting to take delivery of the Boeing Aircraft in stages from the end of 2015 to the mid 2018.
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
Due to Boeing Company's delay in the delivery of the 15 Boeing 787-8 aircraft under the 2005 Aircraft Purchase Agreement, Boeing 787-9 aircraft's better suitability for the Company's markets in terms of the number of seats, performance and economy compared to Boeing 787-8 aircraft plus its contribution to the optimisation of the Company's fleet structure, the Company agreed to purchase 15 Boeing 787-9 aircraft to replace the 15 Boeing 787-8 aircraft. The Transaction will expand the capacity of the Company's fleet. 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 increase the fleet capacity of the Group by approximately 11% based on available tonne kilometers of the Group as at 31 December 2009. The Company expects the Boeing 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.
FURTHER INFORMATION
CNAHC currently directly and indirectly owns approximately 51.83% 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 to the Transaction. Pursuant to Rule 14.44 of the Listing Rules, a written approval of CNAHC may be accepted in lieu of holding a general meeting to approve the Transaction.
However, pursuant to the relevant regulations of the Shanghai Stock Exchange on which the Company's A shares are listed, the Transaction is required to be approved by the Company's shareholders at a general meeting. Therefore, an extraordinary general meeting of the Company will be convened to approve the Transaction. The Company expects to dispatch a circular containing the information required under the Listing Rules in relation to the Transaction within 15 business days after the publication of this announcement.
DEFINITION
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
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"AIE" |
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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"Boeing Aircraft" |
15 Boeing 787-9 aircraft to be purchased by the Company pursuant to the Boeing Aircraft Supplemental Agreement |
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"Boeing Aircraft Supplemental Agreement" |
the aircraft supplemental agreement dated 31 August 2010 pursuant to which the Company has agreed to purchase and Boeing Company has agreed to sell the Boeing Aircraft |
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"Boeing Company" |
The Boeing Company, a company incorporated under the Laws of Delaware of the United States |
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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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"CNAHC" |
China National Aviation Holding Company, a company incorporated in the People's Republic of China |
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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" |
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
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"Previous 2010 Boeing Aircraft Purchase" |
the purchase of 20 Boeing 737-800 aircraft pursuant to Boeing aircraft purchase agreement entered into by the Company, AIE and Boeing Company on 25 June 2010 |
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"Transaction" |
the acquisition by the Company of the Boeing Aircraft pursuant to the Boeing Aircraft Supplemental Agreement |
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"2005 Aircraft Purchase Agreement" |
the aircraft purchase agreement dated 8 August 2005 entered into by the Company, AIE and Boeing Company, pursuant to which the Company agreed to purchase 15 Boeing 787-8 aircraft from Boeing Company |
By order of the Board
Air China Limited
Huang Bin Tam Shuit Mui
Joint Company Secretaries
Beijing, the PRC, 31 August 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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