CONTINUING CONNECTED TRANSACTIONS

RNS Number : 9480D

Air China Ld

30 October 2015

 

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)

CONTINUING CONNECTED TRANSACTIONS

Reference is made to the 2012 Circular in relation to the continuing connected transactions of the Company. At the 2012 EGM, the Independent Shareholders approved certain continuing connected transactions of the Company and their relevant annual caps for the three years ending 31 December 2015 that are required by the Shanghai Listing Rules to be approved by the Independent Shareholders. The Company expected certain continuing connected transactions set out in the 2012 Circular will continue to be conducted after 31 December 2015, therefore the Company will continue to comply with Chapter 14A of the Hong Kong Listing Rules for such continuing connected transactions to be conducted in the next three years (i.e. from 1 January 2016 to 31 December 2018). On 29 October 2015, 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 2016, 2017 and 2018. As each of the applicable Percentage Ratios (other than the profits ratio) of the 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 5.0%, they therefore fall under Rule 14A.76(2)(a) of the Hong Kong Listing Rules. Accordingly, these continuing connected transactions are subject to the reporting, announcement and annual review requirements under Chapter 14A of the Hong Kong Listing Rules, but are exempted from the Independent Shareholders' approval requirement.

However, pursuant to the Shanghai Listing Rules, the Company will seek Independent Shareholders' approval for the continuing connected transactions under Government Charter Flight Service Framework Agreement, Sales Agency Services Framework Agreement, Comprehensive Services Framework Agreement, Properties Leasing Framework Agreement, Construction Project Management Framework Agreement and Media Services Framework Agreement. A circular containing, among other things, details of the continuing connected transactions set out in this announcement, will be despatched to the Shareholders on or before 15 November 2015.

1.       INTRODUCTION

Reference is made to the 2012 Circular in relation to the continuing connected transactions of the Company. At the 2012 EGM, the Independent Shareholders approved certain continuing connected transactions of the Company and their relevant annual caps for the three years ending 31 December 2015 that are required by the Shanghai Listing Rules to be approved by the Independent Shareholders. The Company expected certain continuing connected transactions set out in the 2012 Circular will continue to be conducted after 31 December 2015, therefore the Company will continue to comply with Chapter 14A of the Hong Kong Listing Rules for such continuing connected transactions to be conducted in the next three years (i.e. from 1 January 2016 to 31 December 2018).

On 29 October 2015, 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 2016, 2017 and 2018.

2.       PARTIES AND CONNECTION OF THE PARTIES

The Company, whose principal business activity is air passenger, air cargo and related services, conducts continuing connected transactions with the following parties:

•        CNAHC

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.

•        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.

3.       CONTINUING CONNECTED TRANSACTIONS

3.1     Government Charter Flight Services

The Company entered into the Government Charter Flight Service Framework Agreement with CNAHC on 29 October 2015.

Description of transaction: Pursuant to the Government 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 Government Charter Flight Service Framework Agreement is from 1 January 2016 to 31 December 2018.

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 Government Charter Flight Service Framework Agreement, it is expected that the Company will generate good revenue from such transaction.

Historical Amounts and Proposed Caps:

Set forth below is a summary of the historical annual caps, the actual amounts and the proposed annual caps for the total amount payable by CNAHC to the Company under the Government Charter Flight Service Framework Agreement:

Historical Annual Caps

Historical Actual Amounts

Proposed Annual Caps

Transaction

Annual cap for the year ended 31 December 2013

Annual cap for the year ended 31 December 2014

Annual cap for the year ending 31 December 2015

Actual annual amount for the year ended 31 December 2013

Actual annual amount for the year ended 31 December 2014

Unaudited historical amount for the period from 1 January to 30 June 2015

Estimated annual amount for the year ending 31 December 2015

Annual cap for the year ending 31 December 2016

Annual cap for the year ending 31 December 2017

Annual cap for the year ending 31 December 2018

Total amount payable by CNAHC to the Company in accordance with the Government Charter Flight Service Framework Agreement

RMB900 million

RMB900 million

RMB900 million

RMB380 million

RMB421 million

RMB900 million

RMB161 illion

RMB600 illion

RMB900 million

RMB900 million

 

Basis for such caps:

In arriving at the above caps, the Directors have considered the historical and estimated transaction amounts for the same type of transactions as set out in the table above and the following factors:

•        given the growing influence of China in the world, the government's visiting trips are expected to continue to increase during the period from 2016 to 2018; and

•        uncertainties such as the future jet fuel price could lead to an increase in flight- related costs.

3.2     Sales Agency Services

The Company (for itself and on behalf of its subsidiaries) entered into the Sales Agency Services Framework Agreement with CNAHC (on behalf of CNAHC Group) on 29 October 2015.

Description of transaction: Pursuant to the Sales Agency Services Framework Agreement, the 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 consult with the Sales Agency Companies on a fair and voluntary basis and determine the agency service fee standards. 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.

As for the air cargo agency services, the Company and the Sales Agency Companies will discuss and determine the applicable transportation prices, which shall be no less favourable than the prices offered by independent third parties in the PRC air cargo transportation market for transporting such products, with reference to prices charged by air cargo agencies of the same scale and type, as well as the specific product types and required transportation time. The Sales Agency Companies may formulate the transportation prices charged to their customers (including the prices for extended services offered to their 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 2016 to 31 December 2018.

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 working with the Sales Agency Companies to provide air transportation sales agency services.

Historical Amounts and Proposed Caps:

Set forth below is a summary of the historical annual caps, the actual amounts and the proposed annual caps for sales of airline tickets and cargo space by the Company and its subsidiaries to CNAHC Group for resale to end customers in accordance with the Sales Agency Services Framework Agreement:

Historical Annual Caps

Historical Actual Amounts

Proposed Annual Caps

Transaction

Annual cap for the year ended 31 December 2013

Annual cap for the year ended 31 December 2014

Annual cap for the year ending 31 December 2015

Actual annual amount for the year ended 31 December 2013

Actual annual amount for the year ended 31 December 2014

Unaudited historical amount for the period from 1 January to 30 June 2015

Estimated annual amount for the year ending 31 December 2015

Annual cap for the year ending 31 December 2016

Annual cap for the year ending 31 December 2017

Annual cap for the year ending 31 December 2018

Sales of airline tickets and cargo space by the Company and its subsidiaries to CNAHC Group in accordance with the Sales Agency Services Framework Agreement

RMB270 million

RMB324 million

RMB388.8 million

RMB84 million

RMB78 million

RMB39 million

RMB90 million

RMB138 million

RMB152 million

RMB167 million

For each of the three years ending 31 December 2016, 2017 and 2018, the aggregate annual amount of agency commission to be paid by the Company and its subsidiaries to CNAHC Group is expected to fall below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong Listing Rules; therefore, such transaction will be exempt from the reporting, annual review, announcement and independent shareholders' approval requirements for continuing connected transactions.

  

Basis for such caps:

As such business is showing an overall downward trend due to, among others, national policy adjustments, the Company intends to lower the proposed annual caps for the next three years.

In light of the expected annual increase of 10% in the air passenger and cargo transportation capacity of the Company for the year 2016 to 2018, and the possible increase of air passenger and cargo transportation market price brought by the uncertainty of the future jet fuel cost, based on the estimated maximum sale revenue of airline tickets and cargo space by the Company and its subsidiaries to CNAHC Group for resale to end customers in 2015, it is expected that such sales revenue in 2016 will not exceed RMB138 million and will increase at an annual rate of 10% thereafter.

3.3     Comprehensive Services

The Company (for itself and on behalf of its subsidiaries) entered into the Comprehensive Services Framework Agreement with CNAHC (on behalf of CNAHC Group) on 29 October 2015.

Description of transaction: Pursuant to the Comprehensive Services Framework Agreement:

•        Certain wholly-owned or controlled companies of CNAHC which are engaged in ancillary services in relation to air transportation business ("Specialised Companies") will be appointed as one of the providers of the ancillary services in relation to air transportation business of the Company. Such Specialised Companies, provided that they have obtained the relevant qualifications and certifications, will primarily provide the following services to the Company (including but not limited to):

(i)      supply of various items for in-flight services;

(ii)      properties management services in areas including Beijing, Chengdu, Chongqing, Shanghai, Hangzhou and Guangzhou;

(iii)     hotel accommodation and staff recuperation;

(iv)     airline catering services; and

(v)     printing of air tickets and other publications.

•        The Company is commissioned by CNAHC to provide welfare-logistics services for CNAHC's retired employees.

•        The prices of airline catering services to be provided by the Specialised Companies to the Company will be determined by the parties based on the quotation for the same type of catering services available from independent third parties with reference to relevant factors as mentioned below. A department or an officer designated by the two parties will be responsible for verifying the quotation and market transaction price for the same type of catering services available from independent third parties. In general, inquires on quotation and terms will be made to at least two independent third parties by e-mail, facsimile or telephone. The transaction price will be determined by the two parties after comparison and taking into consideration certain factors including cost of raw materials and labour costs.

•        The prices of property management services to be provided by the Specialised Companies to the Company will be determined by the parties based on the quotation for the same type of property management services available from independent third parties with reference to relevant factors as mentioned below. A department or an officer designated by the two parties will be responsible for verifying the quotation and terms for the same type of property management services available from independent third parties. In general, inquires on quotation and terms will be made to at least two independent third parties by e-mail, facsimile or telephone. The prices of property management services will be determined by the two parties after comparison and taking into consideration certain factors including quotation, quality, scope and type of property management services, and specific needs of the parties.

•        The prices of hotel accommodation and staff recuperation services to be provided by the Specialised Companies to the Company shall be no less favourable than the quotation for the same type of guest room products or services available from independent third parties of the same level in the area of the hotel. A department or an officer designated by the two parties will be responsible for verifying the quotation and terms for the same type of products and services available from independent third parties. In general, inquires on quotation and terms will be made to at least two independent third parties by e-mail, facsimile or telephone. The prices will be determined by the two parties after comparison and taking into consideration certain factors including quotation, quality of products and services, seasonal demand in the hotel industry, location of hotel and specific needs of the parties.

•        For catering supplies, publications and other services to be provided by the Specialised Companies to the Company, the Specialised Companies as supplier of the Company shall provide such services in accordance with the bidding management requirements of the Company. The prices of such services shall be no less favourable than the quotation of similar products or services available from independent third 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 Framework Agreement is from 1 January 2016 to 31 December 2018.

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 (i) knowledge of the aviation industry; (ii) a proven track record of quality and timely service; and (iii) 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:

Set forth below is a summary of the historical annual caps, the actual amounts and the proposed annual caps of the total amount payable by the Company and its subsidiaries to CNAHC Group in accordance with the Comprehensive Services Framework Agreement:

Historical Annual Caps

Historical Actual Amounts

Proposed Annual Caps

Transaction

Annual cap for the year ended 31 December 2013

Annual cap for the year ended 31 December  2014

Annual cap for the year ending 31 December 2015

Actual annual amount for the year ended 31 December 2013

Actual annual amount for the year ended 31 December 2014

Unaudited historical amount for the period from 1 January to 30 June 2015

Estimated annual amount for the year ending 31 December 2015

Annual cap for the year ending 31 December 2016

Annual cap for the year ending 31 December 2017

Annual cap for the year ending 31 December 2018

Amount payable by the Company and its subsidiaries to CNAHC Group in accordance with the Comprehensive Services Framework Agreement

RMB950 million

RMB1,045 million

RMB1,150 million

RMB805  million

RMB853  million

RMB521 million

RMB1,100 million

RMB1,375 million

RMB1,513 million

RMB1,664 million

For each of the three years ending 31 December 2016, 2017 and 2018, the aggregate annual amount payable by CNAHC Group to the Company and its subsidiaries 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.76(1)(a) of the Hong Kong Listing Rules, therefore such transaction will be exempt from the reporting, annual review, announcement and independent shareholders' approval requirements for continuing connected transactions.

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 due to the expansion of the fleet size of the Company and the increase of its transportation capacity. Given the fact that the transaction amount of airline catering services accounts for more than 80% of transaction amount of the comprehensive services and the two companies in which Zhongyi Aviation Investment Co., Ltd. newly invested have started to provide catering services to the Company since 2015 as the Company has been continually

increasing its transportation capacity, the transaction amount under the Comprehensive Services Framework Agreement is expected to increase accordingly. In addition, given CNACD's increasing capability in property management, the Company will be able to undertake more property management businesses in the next three years. It is expected that the actual transaction amount generated by the Company in respect of its businesses under the Comprehensive Services Framework Agreement in 2016 will not exceed RMB1,375 million, and will increase at an annual rate of 10% afterwards.

3.4     Property Leasing

The Company (for itself and on behalf of its subsidiaries) entered into the Properties Leasing Framework Agreement with CNAHC (on behalf of CNAHC Group) on 29 October 2015.

Description of transaction: Pursuant to the Properties Leasing Framework Agreement, the Company will lease from CNAHC a number of properties for various uses including as business premises, offices and storage facilities.

The Company will lease to CNAHC a number of properties.

The rent payable by the Company under the Properties Leasing Framework Agreement will be determined based on the quotation for leasing services available from independent third parties for the same type of properties in close proximity to the properties with reference to relevant factors as mentioned below. A department or an officer designated by the two parties will be responsible for verifying the quotation and terms for the same type of properties and related services available from independent third parties. In general, inquires on quotation and terms will be made to at least two independent third parties by e-mail, facsimile or telephone. The property leasing prices will be determined by the two parties after comparison and taking into consideration certain factors including quotation, property service quality, location and district of properties and specific needs of the parties, and specific property leasing agreements will be entered into.

The term of the Properties Leasing Framework Agreement is from 1 January 2016 to 31 December 2018.

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:

Set forth below is a summary of the historical annual caps, the actual amounts and the proposed annual caps for the rent payable by the Company and its subsidiaries to CNAHC Group under the Properties Leasing Framework Agreement:

Historical Annual Caps

Historical Actual Amounts

Proposed Annual Caps

Transaction

Annual cap for the year ended 31 December 2013

Annual cap for the year ended 31 December  2014

Annual cap for the year ending 31 December 2015

Actual annual amount for the year ended 31 December 2013

Actual annual amount for the year ended 31 December 2014

Unaudited historical amount for the period from 1 January to 30 June 2015

Estimated annual amount for the year ending 31 December 2015

Annual cap for the year ending 31 December 2016

Annual cap for the year ending 31 December 2017

Annual cap for the year ending 31 December 2018

Amount payable by the Company and its subsidiaries to CNAHC Group in accordance with the Comprehensive Services Framework Agreement

RMB120 million

RMB138 million

RMB150 million

RMB84 million

RMB84 million

RMB60 million

RMB140 million

RMB155 million

RMB178 million

RMB200 million

The annual aggregate amount of rent payable by CNAHC Group to the Company and its subsidiaries for each of the three years ending 31 December 2016, 2017 and 2018 are expected to fall below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong Listing Rules, and therefore such transaction will be exempt from the reporting, annual review, announcement and independent shareholders' approval requirements for continuing connected transactions.

Basis for such caps:

As at the date hereof, the Company and its subsidiaries have leased an aggregate area of approximately 50,000 sq.m. from CNAHC Group. The Company expects that the rent level will rise in the next three years but there will be no significant change in the floor area to be leased from CNAHC Group.

In arriving at the annual caps, the Company and its subsidiaries have taken into account the possible 10% to 15% overall annual rental increase and made the calculation based on the estimated rental expenditure of RMB140 million for the year of 2015. It is estimated that the rental expenditure for 2016 will not exceed RMB155 million, and will increase at an annual rate of 10%-15% afterwards.

3.5     Media and Advertising Services

The Company entered into the Media Services Framework Agreement with CNAMC on 29 October 2015.

Description of transaction: Pursuant to the Media Services Framework Agreement, CNAMC will have the following rights:

•        an exclusive right to distribute in-flight reading materials of the Company;

•        an exclusive operation right of certain media of the Company, including the boarding passes, in-flight entertainment programmes and flight schedules;

•        a right to be commissioned to purchase in-flight entertainment programmes (which may include advertising contents) 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. CNAMC will develop new media for the Company and publish advertisements produced by CNAMC or for which CNAMC acts as agent. Such media include: (i) outdoor advertisements on properties owned by the Company; (ii) ground broadcasting programmes (at ticket offices and on airport shuttles); (iii) ticket envelopes (including air ticket envelopes and boarding pass envelopes); and (iv) the Company's official website, in-flight network, air-ground communications, etc. that can be used as media; and

•        the right to act as operator of the Company's media business to provide the Company with services including: (i) design, production and publishing of advertisements; (ii) development and maintenance of certain online services on the website managed by e-commerce function of the Company; (iii) participation in the development of the Company's brand strategy and annual marketing plan, execution of promotional campaigns and production of advertising materials according to the Company's plan; and (iv) support and supply of certain contents on the Company's public accounts on WeChat and Weibo and the Company's mobile app.

As consideration, CNAMC agrees to:

•        pay the Company RMB13,891,500 as media usage fee for each of the three years ending 31 December 2016, 2017 and 2018 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 with sufficient in-flight media (other than in-flight entertainment programmes), including in-flight publications, boarding passes and flight schedules that meet the Company's requirements; and

•        pay the Company 20% of any revenue from any new advertising media of the Company not mentioned in the Media Services Framework Agreement but proposed to be developed by CNAMC on a case by case basis.

The Company agrees to:

•        pay the purchase price to CNAMC for the in-flight entertainment programmes 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 to CNAMC; and

•        pay advertising fees and service fees at market price to CNAMC in respect of advertising design, image promotion and other services conducted by CNAMC for the Company. In general, inquires by e-mail, facsimile or telephone or face-to-face consulting on quotation and terms will be made by the Company to independent third parties, and the advertising fees and service fees will be determined taking into consideration certain factors including quotation, service quality and specific needs of the parties.

The term of the Media Services Framework Agreement is from 1 January 2016 to 31 December 2018.

Reasons for such transaction: The Directors believe that it is in the best interest of the Company to enter into above transaction 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:

Set forth below is a summary of the historical annual caps, the actual amounts and the proposed annual caps for the amount payable by the Company to CNAMC under the Media Services Framework Agreement:

Historical Annual Caps

Historical Actual Amounts

Proposed Annual Caps

Transaction

Annual cap for the year ended 31 December 2013

Annual cap for the year ended 31 December  2014

Annual cap for the year ending 31 December 2015

Actual annual amount for the year ended 31 December 2013

Actual annual amount for the year ended 31 December 2014

Unaudited historical amount for the period from 1 January to 30 June 2015

Estimated annual amount for the year ending 31 December 2015

Annual cap for the year ending 31 December 2016

Annual cap for the year ending 31 December 2017

Annual cap for the year ending 31 December 2018

Amount payable by the Company to CNAMC in accordance with the Media Services Framework Agreement

RMB138 million

RMB151.8 million

RMB167 million

RMB66  million

RMB111 million

RMB29 million

RMB160 million

RMB270 million

RMB297 million

RMB326.7 million

The annual amount payable by CNAMC to the Company under the Media Services Framework Agreement for each of the three years ending 31 December 2016, 2017 and 2018 is expected to fall below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong Listing Rules, and therefore such transaction will be exempt from the reporting, annual review, announcement and independent shareholders' approval requirements for continuing connected transactions.

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, and commission CNAMC to purchase more entertainment programmes. In addition, due to the increased number of aircraft of the Company, the need for entertainment programmes will increase correspondingly. On the marketing front, the Company will gradually increase its investment in advertising on an annual basis. CNAMC will participate more in the Company's advertising promotion work in the next three years.

Based on the estimated amount payable by the Company to CNAMC under the Media Services Framework Agreement for the year of 2015, it is estimated that such transaction amount for 2016 will not exceed RMB270 million, and will increase at an annual rate of 10% afterwards.

4.       LISTING RULES IMPLICATIONS

As each of the applicable Percentage Ratios (other than the profits ratio) of the continuing connected transactions (excluding the de minimis continuing connected transactions) set out above, on an annual basis, is higher than 0.1% and less than 5.0%, they therefore fall under Rule 14A.76(2)(a) of the Hong Kong Listing Rules. Accordingly, these continuing connected transactions are subject to the reporting, announcement and annual review requirements under Chapter 14A of the Hong Kong Listing Rules, but are exempted from the Independent Shareholders' approval requirement.

Mr. Cai Jianjiang, Ms. Wang Yinxiang, Mr. Cao Jianxiong and Mr. Feng Gang are considered to have a material interest in each of the continuing connected transactions set out above and therefore have abstained from voting in the relevant board resolutions in respect of the continuing connected transactions. Save as disclosed above, none of the Directors have a material interest in any of the continuing connected transactions and hence no other Director is required to abstain from voting in the relevant board resolutions.

5.       PRC LAW IMPLICATIONS

Pursuant to the Shanghai Listing Rules, the following agreements shall be approved or ratified by the Independent Shareholders at the extraordinary general meeting of the Company:

(1)     Government Charter Flight Service Framework Agreement;

(2)     Sales Agency Services Framework Agreement;

(3)     Comprehensive Services Framework Agreement;

(4)     Properties Leasing Framework Agreement;

(5)     Construction Project Management Framework Agreement; and

(6)     Media Services Framework Agreement.

A circular containing, among other things, details of the continuing connected transactions set out in this announcement, will be despatched to the Shareholders on or before 15 November 2015.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:

"2012 Circular"	the circular issued by the Company on 4 December 2012 to its Shareholders in respect of certain continuing connected transactions
"2012 EGM"	the Company's extraordinary general meeting held on 20 December 2012
"Board"	the board of Directors of the Company
"CNACD"	China National Aviation Construction and Development Company, a wholly-owned subsidiary of CNAHC
"CNAHC"	China National Aviation Holding Company, a substantial shareholder of the Company
"CNAHC Group"	CNAHC, its subsidiaries and its associates (excluding the Company)
"CNAMC"	China National Aviation Media and Advertisement Co., Ltd., a wholly-owned subsidiary of CNAHC
"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
"Comprehensive Services Framework Agreement"	the comprehensive services framework agreement entered into between the Company (for itself and on behalf of its subsidiaries) and CNAHC (on behalf of CNAHC Group) on 29 October 2015
"Construction Project Management Framework Agreement"	the framework agreement for assigning management of basic construction project entered into between the Company and CNACD on 29 October 2015. The annual amount payable by the Company under the Construction Project Management Framework Agreement for each of the three years ending 31 December 2016, 2017 and 2018 is expected to fall below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong Listing Rules. Accordingly, such transaction will be fully exempt from the reporting, annual review, announcement and independent shareholders' approval requirements for continuing connected transactions
"Directors"	the directors of the Company
"Government Charter Flight Service Framework Agreement"	the government charter flight service framework agreement entered into between the Company and CNAHC on 29 October 2015
"Hong Kong Listing Rules"	The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"Hong Kong Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Independent Shareholders"	the shareholders of the Company, other than CNAHC and its associates
"Media Services Framework Agreement"	the media services framework agreement entered into between the Company and CNAMC on 29 October
"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"
"PRC"	The People's Republic of China, excluding, for the purpose of this announcement only, Hong Kong, Macau and Taiwan
"Properties Leasing Framework Agreement"	the properties leasing framework agreement entered into between the Company (for itself and on behalf of its subsidiaries) and CNAHC (on behalf of CNAHC Group) on 29 October 2015
"RMB"	Renminbi, the lawful currency of the PRC
"Sales Agency Companies"	certain subsidiaries of CNAHC acting as the Company's sales agents pursuant to the Sales Agency Services Framework Agreement
"Sales Agency Services Framework Agreement"	the sales agency services framework agreement entered into between the Company (for itself and on behalf of its subsidiaries) and CNAHC (on behalf of CNAHC Group) on 29 October 2015
"Shanghai Listing Rules"	the Rules Governing the Trading of Stocks on the Shanghai Stock Exchange
"Shareholders"	the shareholders of the Company

By order of the Board

Air China Limited

Rao Xinyu          Tam Shuit Mui

Joint Company Secretaries

Beijing, the PRC, 29 October 2015

As at the date of this announcement, the directors of the Company are Mr. Cai Jianjiang, Ms. Wang Yinxiang, Mr. Cao Jianxiong, Mr. Feng Gang, Mr. John Robert Slosar, Mr. Ian Sai Cheung Shiu, Mr. Song Zhiyong, Mr. Fan Cheng, Mr. Fu Yang*, Mr. Pan Xiaojiang*, Mr. Simon To Chi Keung* and Mr. Stanley Hui Hon-chung*.

* Independent non-executive Director of the Company

 

END

 

 

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