CONTINUING CONNECTED TRANSACTIONS

RNS Number : 0782P

Air China Ld

27 September 2013

 

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 howsoever 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: 753)	CATHAY PACIFIC AIRWAYS LIMITED (Incorporated in Hong Kong with limited liability) (Stock Code: 293)

Joint Announcement

Continuing Connected Transactions

Reference is made to the joint announcements dated 26th June 2008 and 10th September 2010 issued by Air China and Cathay Pacific in connection with the Framework Agreement entered into between Air China and Cathay Pacific on 26th June 2008.  The Framework Agreement will be renewed on 1st October 2013 for a term of three years from 1st January 2014 to 31st December 2016. As Air China is a substantial shareholder and therefore a connected person of Cathay Pacific, the Transactions constitute continuing connected transactions for Cathay Pacific under Rule 14A.14 of the Listing Rules and are subject to reporting, annual review and announcement requirements under Rule 14A.35. As Cathay Pacific is a substantial shareholder and therefore a connected person of Air China, the Transactions constitute continuing connected transactions for Air China under Rule 14A.14 of the Listing Rules and are subject to reporting, annual review and announcement requirements under Rule 14A.35.

Framework Agreement dated 26th June 2008 and to be renewed on 1st October 2013 Parties:      (1)   Air China                    (2)   Cathay Pacific

Background and Particulars Reference is made to the joint announcements dated 26th June 2008 and 10th September 2010 issued by Air China and Cathay Pacific in connection with the Framework Agreement entered into between Air China and Cathay Pacific on 26th June 2008. As Air China is a substantial shareholder and therefore a connected person of Cathay Pacific, the Transactions constitute continuing connected transactions for Cathay Pacific under Rule 14A.14 of the Listing Rules and are subject to reporting, annual review and announcement requirements under Rule 14A.35. As Cathay Pacific is a substantial shareholder and therefore a connected person of Air China, the Transactions constitute continuing connected transactions for Air China under Rule 14A.14 of the Listing Rules and are subject to reporting, annual review and announcement requirements under Rule 14A.35. The Framework Agreement provides the framework under which Relevant Agreements between members of Air China Group on the one hand and members of Cathay Pacific Group on the other hand are entered into, renewed and extended.  The Transactions (under the Relevant Agreements) are transactions between members of Air China Group on the one hand and members of Cathay Pacific Group on the other hand arising from joint venture arrangements for the operation of passenger air transportation, code sharing arrangements, interline arrangements, aircraft leasing, frequent flyer programmes, the provision of airline catering, ground support and engineering services and other services agreed to be provided and other transactions agreed to be undertaken under the Framework Agreement.   The Framework Agreement will be automatically renewed on 1st October 2013 for a term of three years from 1st January 2014 to 31st December 2016.  Under its terms, it is automatically renewed for successive periods of three years after its initial expiry date unless either party to it gives to the other notice of termination of not less than three months expiring on any 31st December.

The annual caps The annual caps for the Transactions have been determined by reference to the actual payments in respect of the Transactions in the two years ended 31st December 2012 and the forecast payments in respect of the Transactions to be made by Air China Group to Cathay Pacific Group, and by Cathay Pacific Group to Air China Group, having regard, inter alia, to the projections of Air China Group and Cathay Pacific Group in respect of their fleet sizes, the delivery schedules of new aircraft which they have ordered, aircraft daily utilisation and other operating parameters. The Air China Directors estimate that the amounts payable by Cathay Pacific Group to Air China Group, and payable by Air China Group to Cathay Pacific Group, in respect of the Transactions will not exceed the annual caps set out below. The Cathay Pacific Directors estimate that the amounts payable by Air China Group to Cathay Pacific Group, and payable by Cathay Pacific Group to Air China Group, in respect of the Transactions will not exceed the annual caps set out below.

Payable by Air China Group to Cathay Pacific Group:

	2011	2012	2013	2014	2015	2016
(HK$ million)	Actual	Actual	Cap	Cap	Cap	Cap
Transactions	287	244	900	900	900	900

Payable by Cathay Pacific Group to Air China Group:

	2011	2012	2013	2014	2015	2016
(HK$ million)	Actual	Actual	Cap	Cap	Cap	Cap
Transactions	353	321	900	900	900	900

Reasons for, and benefits of, the Transactions The cooperation between Air China Group and Cathay Pacific Group is expected to continue to further the development of Beijing Capital International Airport and Hong Kong International Airport as gateways to and hubs for Mainland China and will assist Air China Group and Cathay Pacific Group in their efforts to optimise the allocation of operating resources.

Connection between the parties Air China, by virtue of its 29.99% shareholding in Cathay Pacific, is a substantial shareholder and therefore a connected person of Cathay Pacific under the Listing Rules. Cathay Pacific, by virtue of its 20% shareholding in Air China, is a substantial shareholder and therefore a connected person of Air China under the Listing Rules.

Compliance with Listing Rules As the highest of the relevant percentage ratios as defined under Rule 14.07 of the Listing Rules (other than the profits ratio) in respect of the annual caps applicable to the Transactions will, on an annual basis, be more than 0.1% but less than 5%, the Transactions constitute continuing connected transactions for each of Air China and Cathay Pacific and are subject to announcement, annual review and reporting requirements under Rule 14A.35 of the Listing Rules, but exempt from the independent shareholders' approval requirements. Each of Air China and Cathay Pacific will comply with the continuing obligations under Rules 14A.37-41 of the Listing Rules and will re-comply with the relevant Listing Rules if the annual caps are exceeded, when the Framework Agreement is renewed or when there is a material change to its terms.

Opinion of the directors The Air China Directors, including the independent non-executive directors, consider that the Framework Agreement is on normal commercial terms, that its terms are fair and reasonable and in the interests of Air China and its shareholders as a whole and that renewal of the Framework Agreement is in the ordinary and usual course of Air China's business. The Cathay Pacific Directors, including the independent non-executive directors, consider that the Framework Agreement are on normal commercial terms, that its terms are fair and reasonable and in the interests of Cathay Pacific and its shareholders as a whole and that renewal of the Framework Agreement is in the ordinary and usual course of Cathay Pacific's business. Wang Changshun, Cai Jianjiang, Fan Cheng, Christopher Pratt and Ian Shiu, being directors of Cathay Pacific, are materially interested in the Transactions and have abstained from voting on the relevant board resolutions of Air China in respect of the Transactions. Christopher Pratt, Wang Changshun, Cai Jianjiang, Fan Cheng, Ian Shiu and Zhao Xiaohang, being directors and/or chief executives of Air China, are materially interested in the Transactions and have abstained from voting on the relevant board resolutions of Cathay Pacific in respect of the Transactions.

Directors of Air China As at the date of this announcement, the Air China Directors are: Non-Executive Directors:  Wang Changshun (Chairman), Wang Yinxiang, Cao Jianxiong,  Sun Yude,  Christopher Pratt,  Ian Shiu; Executive Directors:  Cai Jianjiang, Fan Cheng; and Independent Non-Executive Directors:  Fu Yang, Li Shuang, Han Fangming and Yang Yuzhong.

Directors of Cathay Pacific As at the date of this announcement, the Cathay Pacific Directors are: Executive Directors:  Christopher Pratt (Chairman), James Barrington, Ivan Chu, Martin Murray and John Slosar; Non-Executive Directors:  Cai Jianjiang, Fan Cheng, James W.J. Hughes-Hallett, Peter Kilgour, Ian Shiu, Merlin Swire, Wang Changshun and Zhao Xiaohang; and Independent Non-Executive Directors:  Irene Lee, Jack So, Tung Chee Chen and Peter Wong.

Definitions
"Air China"	Air China Limited, a company incorporated in the People's Republic of China, whose H shares are listed on the 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.  The principal activity of Air China is the operation of scheduled airline services.
"Air China Directors"	The directors of Air China.
"Air China Group"	Air China and its subsidiaries.
"Cathay Pacific"	Cathay Pacific Airways Limited, a company incorporated in Hong Kong and listed on the Stock Exchange, the principal activity of which is the operation of scheduled airline services.
"Cathay Pacific Directors"	The directors of Cathay Pacific.
"Cathay Pacific Group"	Cathay Pacific and its subsidiaries, including Dragonair.
"Dragonair"	Hong Kong Dragon Airlines Limited, a wholly owned subsidiary of Cathay Pacific, the principal activity of which is the operation of scheduled airline services.
"Framework Agreement"	The framework agreement dated 26th June 2008 between Air China and Cathay Pacific under which a framework is provided for entry into the Relevant Agreements.
"Listing Rules"	The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
"Relevant Agreements"	Agreements between members of the Air China Group on the one hand and members of the Cathay Pacific Group on the other hand in respect of the Transactions.
"Stock Exchange"	The Stock Exchange of Hong Kong Limited.
"Transactions"	Transactions between members of Air China Group on the one hand and members of Cathay Pacific Group on the other hand arising from joint venture arrangements for the operation of passenger air transportation, code sharing arrangements, interline arrangements, aircraft leasing, frequent flyer programmes, the provision of airline catering, ground support and engineering services and other services agreed to be provided and other transactions agreed to be undertaken under the Framework Agreement.

By Order of the Board Air China Limited Rao Xinyu   Tam Shuit Mui Joint Company Secretaries Beijing, 26th September 2013

By Order of the Board Cathay Pacific Airways Limited David Fu Company Secretary Hong Kong, 26th September 2013

 

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