TIDMAIRC
RNS Number : 7912F
Air China Ld
31 October 2018
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: 00753)
CONTINUING CONNECTED TRANSACTIONS
Reference is made to the 2015 Circular in relation to the
continuing connected transactions of the Company. At the 2015 EGM,
the Independent Shareholders approved certain continuing connected
transactions of the Company and their relevant annual caps for the
three years ending 31 December 2018 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 2015 Circular will continue to be
conducted after 31 December 2018, 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 2019 to 31 December
2021).
On 30 October 2018, 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 2019,
2020 and 2021.
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,
1. INTRODUCTION
Reference is made to the 2015 Circular in relation to, among
others, the continuing connected transactions of the Company. At
the 2015 EGM, the Independent Shareholders approved certain
continuing connected transactions of the Company and their relevant
annual caps for the three years ending 31 December 2018 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 2015 Circular will continue
to be conducted after 31 December 2018, 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 2019 to 31 December
2021).
On 30 October 2018, 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
2021.
2. PARTIES AND CONNECTIONS 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 its
state-owned assets and its equity interest in investees, charter of
aircraft and maintenance of aviation equipment.
-- 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.
-- CNACD
CNACD is a wholly-owned subsidiary of CNAHC and is therefore a
connected person of the Company as defined under the Hong Kong
Listing Rules. CNACD is primarily engaged in businesses such as
entrusted asset management, real estate development, and
implementation and supervision of construction projects.
3. CONTINUING CONNECTED TRANSACTIONS
3.1. Government Charter Flight Services
The Company entered into the Government Charter Flight Service
Framework Agreement with CNAHC on 30 October 2018.
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 fulfill 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 × (1 + 6.5%)
Total cost per flight hour includes direct costs and indirect
costs.
The initial term of the Government Charter Flight Service
Framework Agreement is from 1 January 2019 to 31 December 2021.
Upon expiration of the initial term, the Government Charter Flight
Service Framework Agreement may be automatically renewed for
successive terms of three years each, subject to the satisfaction
of the requirements of the Hong Kong Listing Rules/Shanghai Listing
Rules and the performance of the approval procedures required by
the Hong Kong Listing Rules/Shanghai Listing Rules. Upon expiry of
the Government Charter Flight Service Framework Agreement, the
Board will re-assess the terms and conditions of the Government
Charter Flight Service Framework Agreement, and the Company will
re-comply with the relevant rules governing connected transactions
under the Hong Kong Listing Rules/Shanghai Listing Rules. During
the term of the Government Charter Flight Service Framework
Agreement, either party may terminate the agreement on any 31
December by giving the other party at least three months' written
notice.
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 Historical Actual Amounts Proposed Annual
Caps Caps
Unaudited
Actual Actual historical Estimated
annual annual amount annual
Annual Annual Annual amount amount for amount Annual Annual Annual
cap cap cap for for the for cap cap cap
for for for the the period the for for for
the the the year year from year the the the
year year year ended ended 1 January ending year year year
Transaction ended ended ended 31 31 to 30 31 December ending ending ending
31 31 31 December December June 2018 31 31 31
December December December 2016 2017 2018 December December December
2016 2017 2018 2019 2020 2021
Total amount
payable by
CNAHC
to the RMB900 RMB900 RMB900 RMB518 RMB441 RMB178 RMB500 RMB900 RMB900 RMB900
Company million million million million million million million million million million
in
accordance
with the
Government
Charter
Flight
Service
Framework
Agreement
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 2019 to 2021; 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 entered into the Sales Agency Services Framework
Agreement with CNAHC on 30 October 2018.
Description of transaction: Pursuant to the Sales Agency
Services Framework Agreement, the Sales Agency Companies will:
-- procure purchasers for the Group's air tickets and cargo spaces on a commission basis; or
-- purchase air tickets (other than domestic air tickets) and
cargo spaces from the Group and resell such air tickets and cargo
spaces to end customers.
As for the air passenger agency services, the Group will consult
with the Sales Agency Companies on a fair and voluntary basis and
determine the agency service fee standards. In addition, the Group
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 Group 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 Group 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 initial term of the Sales Agency Services Framework
Agreement is from 1 January 2019 to 31 December 2021. Upon
expiration of the initial term, the Sales Agency Services Framework
Agreement may be automatically renewed for successive terms of
three years each, subject to the satisfaction of the requirements
of the Hong Kong Listing Rules/ Shanghai Listing Rules and the
performance of the approval procedures required by the Hong Kong
Listing Rules/Shanghai Listing Rules. Upon expiry of the Sales
Agency Services Framework Agreement, the Board will re-assess the
terms and conditions of the Sales Agency Services Framework
Agreement, and the Company will re-comply with the relevant rules
governing connected transactions under the Hong Kong Listing Rules/
Shanghai Listing Rules. During the term of the Sales Agency
Services Framework Agreement, either party may terminate the
agreement on any 31 December by giving the other party at least
three months' written notice.
Reasons for the transaction: The Group 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 Group 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 Group is willing to
continue working with the Sales Agency Companies to provide air
transportation sales agency services.
For each of the three years ending 31 December 2019, 2020, and
2021, the aggregate annual amount of sales of airline tickets and
cargo space by the Group to CNAHC Group and the aggregate annual
amount of agency commission payable by the Group to CNAHC Group
under the Sales Agency Services Framework Agreement are expected to
fall below the de minimis threshold as stipulated under Rule
14A.76(1)(a) of the Hong Kong Listing Rules; therefore, the above
transaction will be exempt from the reporting, annual review,
announcement and independent shareholders' approval requirements
under Chapter 14A of the Hong Kong Listing Rules for continuing
connected transactions.
3.3. Comprehensive Services
The Company entered into the Comprehensive Services Framework
Agreement with CNAHC on 30 October 2018.
Description of transaction: Pursuant to the Comprehensive
Services Framework Agreement:
-- CNAHC Group will be appointed as one of the providers of
ancillary production and supply services of the Group. The primary
services provided by CNAHC Group (provided that its relevant
members have obtained the relevant qualifications and
certifications) to the Group include but are not limited to:
(1) supply of various items for in-flight services;
(2) property management services in areas including Beijing,
Chengdu, Chongqing, Shanghai, Hangzhou and Guangzhou;
(3) hotel accommodation and staff recuperation;
(4) airline catering services; and
(5) printing of air tickets and other publications.
-- The Company accepts the commission of CNAHC and will provide
welfare-logistics services for CNAHC's retired employees.
-- The prices of airline catering services to be provided by
CNAHC Group to the Group will be determined by the parties based on
the prices 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
market price for the same type of catering services available from
independent third parties. In general, inquires on prices 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.
When products change according to service demands, appropriate
adjustment will be made upon negotiation between the two parties
based on the variation in cost of raw materials or CPI index.
-- The prices of property management services to be provided by
CNAHC Group to the Group will be determined by the parties based on
the price 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 prices and
terms of the same type of property management services available
from independent third parties. In general, inquiries on prices and
terms will be made to at least two independent third parties by
e-mail, facsimile or telephone. The price of property management
services will be determined by the two parties after comparison and
taking into consideration certain factors including 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 CNAHC Group to the Group shall be no
less favourable than the prices 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 Company will be responsible for verifying the
prices and terms for the same type of products and services
available from independent third parties. In general, inquires on
prices 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 quality of products and
services, seasonal demand in the hotel industry, location of hotel
and specific needs of the parties.
-- For supply of items for in-flight services, printing and
other services to be provided by CNAHC Group to the Group, CNAHC
Group as a supplier of the Group shall provide such services in
accordance with the bidding management requirements of the Group.
The prices of such services shall be no less favourable than the
prices 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 initial term of the Comprehensive Services Framework
Agreement is from 1 January 2019 to 31 December 2021. Upon
expiration of the initial term, the Comprehensive Services
Framework Agreement may be automatically renewed for successive
terms of three years each, subject to the satisfaction of the
requirements of the Hong Kong Listing Rules/Shanghai Listing Rules
and the performance of the approval procedures required by the Hong
Kong Listing Rules/Shanghai Listing Rules. Upon expiry of the
Comprehensive Services Framework Agreement, the Board will
re-assess the terms and conditions of the Comprehensive Services
Framework Agreement, and the Company will re-comply with the
relevant rules governing connected transactions under the Hong Kong
Listing Rules/ Shanghai Listing Rules. During the term of the
Comprehensive Services Framework Agreement, either party may
terminate the agreement on any 31 December by giving the other
party at least three months' written notice.
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
Group, 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 Group 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 Group to CNAHC Group in accordance with the
Comprehensive Services Framework Agreement:
Historical Annual Historical Actual Amounts Proposed Annual
Caps Caps
Unaudited
Actual Actual historical Estimated
annual annual amount annual
Annual Annual Annual amount amount for amount Annual Annual Annual
cap cap cap for for the for cap cap cap
for for for the the period the for for for
the the the year year from year the the the
year year year ended ended 1 January ending year year year
Transaction ended ended ended 31 31 to 30 31 December ending ending ending
31 31 31 December December June 2018 31 31 31
December December December 2016 2017 2018 December December December
2016 2017 2018 2019 2020 2021
Amount
payable
by the Group RMB1,375 RMB1,513 RMB1,664 RMB1,251 RMB1,285 RMB711 RMB1,500 RMB2,100 RMB2,500 RMB3,000
to CNAHC million million million million million million million million million million
Group
in accordance
with the
Comprehensive
Services
Framework
Agreement
For each of the three years ending 31 December 2019, 2020 and
2021, the aggregate annual amount payable by CNAHC to the Company
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 under Chapter 14A of the Hong Kong Listing Rules 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 Group's air
passenger services in the next few years. As the Group has been
continually expanding its fleet size and increasing its
transportation capacity, the demand for ancillary production and
supply services such as supply of items for in-flight services,
airline catering services and aviation ground services will
continue to grow and the transaction amount under the Comprehensive
Services Framework Agreement is expected to increase accordingly.
In addition, the increase in labour cost in the future will result
in the increase in transaction amount. In light of the above
factors, based on the annual cap of 2018 and the annual growth rate
of approximately 20%, it is expected that the amount payable by the
Group to CNAHC Group in 2019 in accordance with the Comprehensive
Services Framework Agreement will not exceed RMB2,100 million, and
will increase at an annual rate of 20% afterwards.
3.4. Property Leasing
The Company entered into the Properties Leasing Framework
Agreement with CNAHC on 30 October 2018.
Description of transaction: Pursuant to the Properties Leasing
Framework Agreement, CNAHC Group agreed to lease part of its
properties to the Group for uses as its business premises, offices
and storage housing; and the Group also agreed to lease to CNAHC
Group part of its properties for the same uses.
The rent payable under the Properties Leasing Framework
Agreement will be determined by the two parties based on the prices
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 prices and terms for the same type of properties and
related services available from independent third parties. In
general, inquires on prices 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 property service quality, location and district
of properties and specific needs of the parties, and specific
property leasing agreements will be entered into.
The initial term of the Properties Leasing Framework Agreement
is from 1 January 2019 to 31 December 2021. Upon expiration of the
initial term, the Properties Leasing Framework Agreement may be
automatically renewed for successive terms of three years each,
subject to the satisfaction of the requirements of the Hong Kong
Listing Rules/ Shanghai Listing Rules and the performance of the
approval procedures required by the Hong Kong Listing
Rules/Shanghai Listing Rules. Upon expiry of the Properties Leasing
Framework Agreement, the Board will re-assess the terms and
conditions of the Properties Leasing Framework Agreement, and the
Company will re-comply with the relevant rules governing connected
transactions under the Hong Kong Listing Rules/Shanghai Listing
Rules. During the term of the Properties Leasing Framework
Agreement, either party may terminate the agreement on any 31
December by giving the other party at least three months' written
notice.
Reasons for such transaction: In the ordinary course of
business, the Group has entered into similar property leasing
transactions with various parties including both connected persons
and independent third parties.
Historical Amounts:
Set forth below is the historical annual caps and the actual
amounts of the rent payable by the Group to CNAHC Group under the
properties leasing framework agreement entered between the Company
and CNAHC on 29 October 2015:
Historical Annual Caps Historical Actual Amounts
Unaudited
Actual Actual historical Estimated
annual annual amount annual
Annual Annual Annual amount amount for the amount
cap for cap for cap for for the for the period for the
the year the year the year year year from 1 year ending
ended ended ended ended ended January 31 December
Transaction 31 December 31 December 31 December 31 31 to 30 2018
2016 2017 2018 December December June
2016 2017 2018
Rent payable RMB155 RMB178 RMB200 RMB104 RMB107 RMB52 RMB117
by the Group million million million million million million million
to CNAHC
Group
Proposed Caps:
As IFRS 16 "Lease" will take effect from 1 January 2019 and be
applicable to financial years starting on or after 1 January 2019,
pursuant to the requirements of the Hong Kong Stock Exchange, the
annual caps for the continuing connected transactions of property
leasing with the Group as the lessee for the years 2019, 2020 and
2021 will be set based on the total value of right-of-use assets
relating to the leases to be entered into by the Group, as detailed
in the table below:
Proposed Annual Caps
Annual cap Annual cap Annual cap
for the year for the year for the year
ending 31 ending 31 ending 31
December 2019 December 2020 December 2021
Total value of right-of-use assets
relating to the leases to be
entered into by the Group acting
as lessee in accordance with RMB500 million RMB550 million RMB620 million
the Properties Leasing Framework
Agreement
The aggregate annual amount of rent payable by CNAHC Group to
the Group for each of the three years ending 31 December 2019, 2020
and 2021 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 under Chapter 14A of the Hong Kong Listing Rules for
continuing connected transactions.
Basis for such caps:
In arriving at the above caps, the Directors have considered (i)
the historical transaction amount for the same type of
transactions; (ii) the future growth of rent (estimated to be
approximately 5% per year) payable by the Group to CNAHC Group and
the increase in the leasing of the Group (estimated to be
approximately 10% per year) arising from business development of
the Group; (iii) the estimated future total annual rents to be paid
by the Group to CNAHC Group by taking the above factors into
consideration, the amount of which for the years 2019, 2020 and
2021 is estimated to be not exceeding RMB135 million, RMB155
million and RMB179 million, respectively; and (iv) the value of
right- of-use assets calculated by discounting the estimated total
annual rents of the future years using the incremental borrowing
rate of the Group as the discount rate.
3.5. Media Services
The Company entered into the Media Services Framework Agreement
with CNAMC on 30 October 2018.
Description of transaction: Pursuant to the Media Services
Framework Agreement, CNAMC will provide Media Services to the
Group. Of which, the Company grants CNAMC an exclusive right to
distribute in-flight reading materials of the Company. Based on
business needs, CNAMC and the Company will enter into relevant
business execution agreements under which the Company shall be
responsible for the standards, budgets, and appraisal of business
execution while CNAMC shall be responsible for the actual
implementation of business execution. Where CNAMC provides Media
Services for the subsidiaries of the Company, the parties thereto
will enter into relevant business execution agreements based on the
principles under the Media Services Framework Agreement.
-- In respect of Media Services provided by CNAMC to the
Company, the Company shall pay CNAMC relevant service fees as per
the market price. In general, inquires by e-mail, facsimile or
telephone on prices and terms will be made by the Company to at
least two independent third parties, and the transaction price will
be determined by the two parties after comparison and taking into
consideration certain factors including specific needs of the
parties to the transaction and the service quality.
-- In respect of the Company's media resources used by CNAMC in
operating the Company's media business, CNAMC shall pay the Company
an annual media resource charge of RMB13.8915 million for each of
the three years of 2019, 2020, and 2021 as per the comparable
market prices of the media resources.
The initial term of the Media Services Framework Agreement is
from 1 January 2019 to 31 December 2021. Upon expiration of the
initial term, the Media Services Framework Agreement may be
automatically renewed for successive terms of three years each,
subject to the satisfaction of the requirements of the Hong Kong
Listing Rules/Shanghai Listing Rules and the performance of the
approval procedures required by the Hong Kong Listing
Rules/Shanghai Listing Rules. Upon expiry of the Media Services
Framework Agreement, the Board will re-assess the terms and
conditions of the Media Services Framework Agreement, and the
Company will re-comply with the relevant rules governing connected
transactions under the Hong Kong Listing Rules/Shanghai Listing
Rules. During the term of the Media Services Framework Agreement,
either party may terminate the agreement on any 31 December by
giving the other party at least three months' written notice.
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
-- as a company having engaged in the aviation media business
for a long time, CNAMC possesses professional qualifications and
team and has a profound understanding of the corporate culture and
brand of the Company as well as advantages in aviation media
business sectors such as entertainment programmes production and
advertising agency.
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 Group to CNAMC under the Media Services Framework
Agreement:
Historical Annual Historical Actual Amounts Proposed Annual
Caps Caps
Unaudited
Actual Actual historical Estimated
annual annual amount annual
Annual Annual Annual amount amount for amount Annual Annual Annual
cap cap cap for for the for cap cap cap
for for for the the period the for for for
the the the year year from year the the the
year year year ended ended 1 January ending year year year
Transaction ended ended ended 31 31 to 30 31 December ending ending ending
31 31 31 December December June 2018 31 31 31
December December December 2016 2017 2018 December December December
2016 2017 2018 2019 2020 2021
Amount
payable
by the RMB270 RMB297 RMB326.7 RMB208 RMB158 RMB80 RMB290 RMB550 RMB700 RMB750
Group million million million million million million million million million million
to CNAMC
in
accordance
with
the Media
Services
Framework
Agreement
The annual amount payable by CNAMC to the Group under the Media
Services Framework Agreement for each of the three years ending 31
December 2019, 2020 and 2021 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 under Chapter 14A of the Hong
Kong Listing Rules for continuing connected transactions.
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:
Firstly, as the Group expands its fleet size, the need of the
Group for aviation media businesses such as entertainment
programmes and advertising agency will increase accordingly.
Secondly, the Company's service development strategy requires the
continuous enhancement of its service quality. Therefore, the
Company will continuously increase its investment in the purchase,
production, promotion, and dissemination of aviation media
business, and commission CNAMC to provide more Media Services. As a
result of the above factors, it is expected that the transaction
amount from 2019 to 2021 will increase. Based on the estimated
transaction amount to be paid by the Group to CNAMC in 2018 and
given the above business growth, it is expected that the
transaction amount will not exceed RMB550 million in 2019, and will
not exceed RMB700 million and RMB750 million in 2020 and 2021,
respectively.
3.6. Construction Project
The Company entered into the Construction Project Management
Framework Agreement with CNACD on 30 October 2018.
Description of transaction: Pursuant to the Construction Project
Management Framework Agreement, CNACD is commissioned by the
Company to serve as the manager of the construction projects and
establish project headquarters. It shall provide management
services for the Company's projects based on project
characteristics using its industry expertise and professional
skills. The management work includes the management at the early
stage, management during the implementation of the project, and
management at the late stage.
CNACD receives service fees from the Company based on the
audited amounts in the financial settlement of specific
commissioned projects in accordance with the commissioned
management contract. The service fees shall be calculated as 3% of
the audited amount in the financial settlement of the investment
relating to the management contents provided by CNACD as
commissioned by the Company, with the rewards and penalties agreed
by both parties based on the project management progress and the
balance and the particulars to be specified in individual project
commissioned management contracts. Alternatively, CNACD may receive
service fees from the Company as per the commissioned management
contents based on the size of or investment in the projects to be
commissioned, and the service fees shall be calculated as per the
full-labor cost (including management fee) based on the human
resources and materials invested by CNACD, with the rewards and
penalties agreed by both parties based on the project management
progress and the balance and the particulars to be specified in
relevant agreements. If the actual settlement price of the project
exceeds the investment amount agreed upon by both parties due to
reasons not caused by the Company, the government and force
majeure, CNACD shall pay the excess settlement price.
The initial term of the Construction Project Management
Framework Agreement is from 1 January 2019 to 31 December 2021.
Upon expiration of the initial term, the Construction Project
Management Framework Agreement may be automatically renewed for
successive terms of three years each, subject to the satisfaction
of the requirements of the Hong Kong Listing Rules/Shanghai Listing
Rules and the performance of the approval procedures required by
the Hong Kong Listing Rules/Shanghai Listing Rules. Upon expiry of
the Construction Project Management Framework Agreement, the Board
will re-assess the terms and conditions of the Construction Project
Management Framework Agreement, and the Company will re-comply with
the relevant rules governing connected transactions under the Hong
Kong Listing Rules/Shanghai Listing Rules. During the term of the
Construction Project Management Framework Agreement, either party
may terminate the agreement on any 31 December by giving the other
party at least three months' written notice.
Reasons for such transaction: The Directors believe that it is
in the best interest of the Group to enter into the above
transaction with CNACD because:
-- CNACD specializes in construction projects relating to the
aviation industry, has extensive experience in construction project
management relating to the aviation industry, and cooperated well
with the Company in the past; and
-- Commissioned management is a management model commonly used
in large infrastructure construction projects. Outsourcing
construction project management enables the Company to concentrate
its management resources on the operation of core businesses.
Historical amount and proposed caps:
Set forth below is a summary of the historical annual caps, the
actual amount and the proposed annual caps for the amount payable
by the Company to CNACD under the Construction Project Management
Framework Agreement:
Historical Annual Historical Actual Amount Proposed Annual
Caps Caps
Actual Actual Unaudited Estimated
annual annual amount annual
Annual Annual Annual amount amount for amount Annual Annual Annual
cap cap cap for for the for cap cap cap
for for for the the period the for for for
the the the year year form year the the the
year year year ended ended 1 January ending year year year
Transaction ended ended ended 31 31 to 30 31 December ending ending ending
31 31 31 December December June 2018 31 31 31
December December December 2016 2017 2018 December December December
2016 2017 2018 2019 2020 2021
Amount
payable
by the Below the de minimis
Company threshold as RMB4 RMB1 RMB5 RMB27 RMB120 RMB130 RMB130
to CNACD in stipulated under million million million million million million million
accordance Rule 14A.76(1)(a)
with of the Hong Kong
the Listing Rules
Construction
Project
Management
Framework
Agreement
Basis for such caps: As its business develops, the Company
expects an increase in demand for new, rebuilding and expansion,
and maintenance projects over the next three years. Meanwhile, for
construction projects that have been planned but not started, it is
expected that the progress will be accelerated in the future as the
Company's urgency for using the construction projects has
intensified, and project expense will increase accordingly.
Therefore, it is expected that the transaction amount from 2019 to
2021 will increase compared with that of the past. It is estimated
that the total amount payable by the Company to CNACD under the
Construction Project Management Framework Agreement will not exceed
RMB120 million in 2019, and will not exceed RMB130 million in 2020
and 2021.
4. INTERNAL CONTROL
The Company has adopted the following measures to ensure that
the above continuing connected transactions will be conducted on
normal commercial terms and in accordance their respective
framework agreements and the pricing policies of the Company:
-- Before entering into the above connected transactions, the
Finance Department, the Legal Department, the Asset Management
Department (which has a dedicated sub-division responsible for
management of connected transactions) and if applicable, certain
other relevant departments of the Company will review the proposed
terms for the individual transactions and discuss with the relevant
business department of the Group to ensure that
such transactions are conducted on normal commercial terms and
terms of applicable framework agreements and in compliance with the
pricing policies of the Group before these relevant departments
approve the finalized transaction agreements according to their
authority within the Group.
-- The Asset Management Department of the Company is responsible
for supervising connected transactions. The Asset Management
Department will regularly monitor and collect detailed information
on relevant continuing connected transactions (including but not
limited to the implementation of the pricing policies, payment
arrangement, and actual transaction amounts of the above continuing
connected transactions) to ensure that such transactions are
conducted in accordance with applicable framework agreements for
continuing connected transactions. In addition, the Asset
Management Department will be responsible for reviewing and
evaluating the actual transaction amount and cap balance of the
above continuing connected transactions on a monthly basis. If the
relevant cap is expected to be exceeded, the Asset Management
Department will report to the management of the Company and take
appropriate measures in accordance with the relevant requirements
of the Hong Kong Listing Rules and/or the Shanghai Listing
Rules.
-- The Internal Audit Department of the Company is responsible
for carrying out annual assessment on the internal control
procedures of the Group, including but not limited to information
relating to the management of continuing connected transactions. In
addition, the Internal Audit Department is responsible for
preparing the annual assessment report on internal control and will
submit the same to the Board for review and approval.
-- The independent auditor and the independent non-executive
Directors of the Company will conduct annual review on the
non-exempt continuing connected transactions.
5. HONG KONG 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, Mr. Song Zhiyong, and Mr. Xue Yasong 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.
The Board (including the independent non-executive Directors)
considers that the terms and conditions of the abovementioned
continuing connected transactions are fair and reasonable. Such
continuing connected transactions are on normal commercial terms or
better and in the ordinary and usual course of business of the
Company, and are in the interests of the Company and its
Shareholders as a whole. The Board also considers that the annual
caps for each of the three years ending 31 December 2019, 2020 and
2021 for the abovementioned continuing connected transactions are
fair and reasonable.
6. 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) Media Services Framework Agreement.; and
(6) Construction Project Management 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 2 November
2018.
DEFINITIONS
In this announcement, the following expressions have the
following meanings, unless the context requires otherwise:
"2015 Circular" the circular issued by the Company on 7 November
2015 to its
Shareholders in respect of certain continuing connected
transactions
"2015 EGM" the Company's extraordinary general meeting held on
22 December 2015
"Articles of Association" the articles of association of the
Company, as amended from time
to time
"associate(s)" has the meaning ascribed to it by the Hong Kong
Listing Rules
"Board" the board of Directors of the Company
"CNACD" China National Aviation Construction and Development
Company, a wholly-owned subsidiary of CNAHC
"CNACG" China National Aviation Corporation (Group) Limited, a
wholly- owned subsidiary of CNAHC
"CNAHC" China National Aviation Holding Corporation Limited, a
state- owned enterprise incorporated under the laws of the PRC and
the controlling shareholder of the Company
"CNAHC Group" CNAHC, its subsidiaries and its associates
(excluding the Group) "CNAMC" China National Aviation Media Co.,
Ltd., a wholly-owned
subsidiary of CNAHC
"Company" Air China Limited, a company incorporated in the PRC,
whose H shares are listed on the Stock Exchange as its primary
listing venue and have been admitted to 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 and CNAHC on 30 October 2018
"connected person" has the meaning ascribed to it by the Hong
Kong Listing Rules
"Construction Project Management Framework Agreement"
the framework agreement for assigning management of basic
construction project entered into between the Company and CNACD on
30 October 2018
"CSRC" the China Securities Regulatory Commission
"Director(s)" the director(s) of the Company
"Government Charter Flight Service Framework Agreement"
the government charter flight service framework agreement
entered into between the Company and CNAHC on 30 October 2018
"Group" the Company and its subsidiaries
"H Shareholders" holders of the H Shares
"H Share(s)" the overseas listed foreign share(s) in the share
capital of the Company with a nominal value of RMB1.00 each, which
are listed on the Stock Exchange as its primary listing venue and
have been admitted to the Official List of the UK Listing Authority
as its secondary listing venue
"Hong Kong" Hong Kong Special Administrative Region of the PRC
"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
associate(s)
"Media Services" including but not limited to the operation,
design, creation,
planning, production, promotion, and dissemination in relation
to aviation-related all-media business sectors such as in-flight
entertainment system, in-flight network platform, brand management,
media publicity management, advertisement management, all-media
platform management, media cooperation management, and copyright
management
"Media Services Framework Agreement"
the media services framework agreement entered into between the
Company and CNAMC on 30 October 2018
"Percentage Ratio" has the meaning ascribed to it by the Hong
Kong Listing Rules
"Properties Leasing Framework Agreement"
the properties leasing framework agreement entered into between
the Company and CNAHC on 30 October 2018
"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 and CNAHC on 30 October 2018
"Shanghai Listing Rules" the Rules Governing the Listing of
Stocks on the Shanghai Stock
Exchange
"Shareholder(s)" the shareholders of the Company
"substantial shareholder" has the meaning ascribed thereto under
the Hong Kong Listing
Rules
By Order of the Board
Air China Limited
Zhou Feng Tam Shuit Mui
Joint Company Secretaries
Beijing, the PRC, 30 October 2018
As at the date of this announcement, the directors of the
Company are Mr. Cai Jianjiang, Mr. Song Zhiyong, Mr. Xue Yasong,
Mr. John Robert Slosar, Mr. Wang Xiaokang*, Mr. Liu Deheng*, Mr.
Stanley Hui Hon-chung* and Mr. Li Dajin*.
* Independent non-executive director of the Company
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
POSXFLBXVBFLFBB
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