21st Mar 2006 07:03
Air China Ld21 March 2006 The Stock Exchange of Hong Kong Limited takes no responsibility for the contentsof this announcement, makes no representation as to its accuracy or completenessand expressly disclaims any liability whatsoever for any loss howsoever arisingfrom or in reliance upon the whole or any part of the contents of thisannouncement. AIR CHINA LIMITED (a joint stock limited company incorporated in the People's Republic of Chinawith limited liability) (Stock Code: 753) CONTINUING CONNECTED TRANSACTIONS Further to the announcement of the Company dated 18 November 2005 and withreference to the CNAC Announcement dated 20 March 2006, the Company would liketo announce further details on the Airport Fees Transactions, which areconnected transactions entered into between Air Macau and associates of STDM. Air Macau is a 51% indirectly-owned subsidiary of CNAC. CNAC is an approximately68.4% directly-owned subsidiary of the Company, whose shares are listed on theStock Exchange. Therefore, the Airport Fees Transactions also constitutecontinuing connected transactions for the Company under Chapter 14A of theListing Rules. As the applicable percentage ratios for each of the Airport Fees Transactionsunder the Listing Rules is less than 2.5%, each of the Airport Fees Transactionsis only subject to the reporting, announcement and annual review requirementsunder Rules 14A.45 to 14A.47 and Rules 14A.37 to 14A.40 and is exempt from theindependent shareholders' approval requirement of Chapter 14A of the ListingRules. Further to the announcement of the Company dated 18 November 2005 and withreference to the CNAC Announcement, the Company would like to set out belowfurther details regarding the transactions between Air Macau and the associatesof STDM that constitute continuing connected transactions of the Company for thepurpose of the Listing Rules: (A) AIRPORT FEES TRANSACTION 1. Airport Charges In Air Macau's normal and ordinary course of business, it incurs a number ofairport charges on a daily basis for the use of facilities and services at theMacau International Airport. These airport charges, which are approved andpublished by the Macau Government, include, inter alia, landing charge, loadingcharge, parking charge, airport charge, loading bridge charge, and otherancillary fees. On 17 March 2006, Air Macau and ADA, being the authorized agent responsible forthe global management and provision of operational services to MIAC, includingthe collection of Airport Charges, entered into a legally bindingacknowledgement pursuant to which it was acknowledged by Air Macau and ADA that: (a) MIAC provides certain facilities and services to Air Macau at a price byreference to the rates published by the Macau Government, namely, Portaria n.o282/96/M of 11 November as revised by Portaria n.o 152/98/M, of 15 June, and,Ordem Executiva n.o 36/2004, as amended, supplemented or otherwise modified fromtime to time (the "Macau Gazette"); and (b) payment of all amounts of the Airport Charges are due from Air Macau to ADAin accordance to the provisions set out in the Macau Gazette. The Airport Charges relates to payment of fees to ADA/MIAC in Air Macau'sordinary course of business in compliance with the laws and regulations ofMacau. Currently there is no regulatory mechanism which allows Air Macau to bindthe Macau Government or ADA or MIAC to fix a duration for such transactions viacommercial negotiation with the Macau Government or ADA or MIAC. On or before a date expiring three years from the date of this announcement theCompany will, if required under the Listing Rules, re-determine the annual capfor the Airport Charges for the forthcoming three financial years, publish anannouncement and/or seek independent shareholders' approval of the Company inrespect of the Airport Charges or otherwise comply with the then requirementsunder the Listing Rules. 2. Airport Fees In respect of Air Macau's operation at the Macau International Airport, AirMacau entered into the Airport License on 9 September 2004 and 1 the ProposedAirport License with MIAC with a term of one year (which will be automaticallyrenewed for another year unless it is terminated by either party by way of 90days prior written notice) and one year respectively. The current term of theAirport License will expire on 7 September 2006 and the term of the ProposedAirport License will expire on 28 February 2007. Pursuant to the Airport License and the Proposed Airport License, MIAC licensedcertain floor space (including ticketing and check-in counters, operation/traffic service offices, and lounges) at the Macau International Airport to AirMacau. The current monthly license fee payable by Air Macau amounts toapproximately MOP 600,000 (equivalent to approximately HK$583,000) per month(amounting to approximately MOP 7.2 million (equivalent to approximately HK$7million) per annum). The amounts payable as Airport Fees are calculated by reference to ratespublished by the Macau Government in the government gazette. The Airport Charges and Airport Fees for each of the four years ended 31December, 2002, 2003, 2004 and 2005 were HK$81,045,000, HK$51,927,000,HK$69,337,000 and HK$86,343,000 (unaudited figure) respectively. Suchtransaction amounts were within the relevant cap amount granted to CNAC for therelevant financial year. Both the Airport Charges and the Airport Fees are invoiced and collected by ADA,a 51% owned subsidiary of CNACAL which in turn is wholly-owned subsidiary ofCNACG, on behalf of MIAC, the developer and owner of Macau InternationalAirport. Since CNAC and CNACAL are both subsidiaries of CNAH, ADA is a connectedperson of CNAC. Furthermore, STDM, which has a 14% shareholding interest in AirMacau, has an approximately 33% shareholding in MIAC and hence, MIAC is also aconnected person of CNAC. As a result, the payment of the Airport Charges andthe Airport Fees will constitute connected transactions for CNAC under theListing Rules. As CNAC is a non-wholly owned subsidiary of the Company, thepayment of the Airport Charges and the Airport Fees will also constituteconnected transactions for the Company under Chapter 14A of the Listing Rules.Since ADA does not receive any benefit or additional fee from the Group inrespect to the collection of the Airport Charges and Airport Fees on behalf ofMIAC, ADA, CNACAL, CNACG, CNAH and their respective associates are not deemed tohave a material interest in the Airport Fees Transaction. The Board has considered and proposed that the cap for the annual volume of theAirport Charges and the Airport Fees for each of the three years ending 31December, 2006, 2007 and 2008 shall be HK$130 million, HK$160 million and HK$200million, respectively. Reference is also made to the corresponding cap proposedby the board of CNAC in the CNAC Announcement. As the aggregate annual AirportCharges and Airport Fees payable by Air Macau represents less than 2.5% of theapplicable percentage ratios of the Company, the payment of the Airport Chargesand the Airport Fees is, according to Rule 14.34(1), only subject to thereporting, announcement and annual review requirements set out in Listing Rules14A45 to 14.47 and Rules 14A.37 to 14A.40 and are exempt from the independentshareholders' approval requirement of Chapter 14A of the Listing Rules. The cap proposed for the Airport Fees Transaction is determined with referenceto (a) the rates published by the Macau Government in the government gazette;(b) the previous transactions and figures which are published in CNAC's annualreports in 2002 to 2005; and (c) the growth in passenger uplift as projected bythe management of Air Macau. Neither ADA nor MIAC has the ability to vary suchrates without the prior approval of the Macau Government. (B) REASONS FOR ENTERING INTO THE CONTINUING CONNECTED TRANSACTIONS The Airport Fees Transaction relates to payment of fees to ADA/MAIC in Macau isin CNAC and its subsidiaries' ordinary course of business in compliance with thelaws and regulations of Macau. As Air Macau is an airliner based in Macau andMacau International Airport is the only airport in Macau, it is in the ordinarycourse of business of Air Macau the use the facilities and services and licensecertain floor space at the Macau International Airport. Air Macau entered intothe Airport Fees Transaction for the purpose of operating its business. The Board, including the independent non-executive directors of the Company,consider that the Airport Fees Transactions and the Airport Fees TransactionAnnual Cap are fair and reasonable and in the interests of the Company and itsshareholders taken as a whole, and have been negotiated on an arm's length basisin the usual and ordinary course of business on normal commercial terms and onterms no more favourable than would have been with independent third parties. (C) BUSINESS OF THE GROUP The Group is principally engaged in the provision of air passenger, air cargoand airline-related services. (D) INFORMATION ON CONNECTED PERSONS MIAC is the owner of the Macau International Airport. CNAC is an investing holding company with investments principally engaged in theprovision of air transportation services through Dragonair and Air Macau,airline catering services, airport ground handling services and logisticsservices. CNACG is an investment holding company with investments principally engaged intravel services, air cargo terminals and other aviation related businesses. CNAH is principally engaged in the business of investment holding inairline-related businesses, provision of financial services, hotel operations,construction, media and advertising. DEFINITIONS "ADA" Administration of Airports Limited, a 51% owned subsidiary of CNAC(Macau) Aviation Limited (a wholly-owned subsidiary of CNACG) "Air Macau" Air Macau Company Limited, a company incorporated in Macau withlimited liability and a 51% indirectly-owned subsidiary of the Company "Airport Charges" the airport charges determined by the Macau Government foruse of certain facilities and services at the Macau International Airport whichincludes, inter alia, landing charge, loading charge, parking charge, passengercharge, passenger tax, airport charge, loading bridge charge and other ancillaryfee "Airport License" the airport license entered into between Air Macau and MIACon 8 September 2004 in respect to the license of certain floor space by AirMacau at the Macau International Airport "Airport Fees" the airport fees paid by Air Macau to MIAC pursuant to theAirport Licenses "Airport Fees Transaction" the continuing connected transactions between AirMacau and MIAC in relation to the Airport Charges and Airport Fees as describedin the section headed "(A) Airport Fees Transaction" in this announcement "Airport Fees Transaction the proposed new annual cap of Annual Cap" transaction amount for the Airport Fees Transactions for theperiod from 1 January 2005 to 31 December 2008 as described in the sectionheaded "(A) Airport Fees Transaction" in this announcement. "associate(s)" has the meaning ascribed thereto in the Listing Rules "Board" the board of directors of the Company "CNACAL" CNAC (Macau) Aviation Limited, a wholly-owned subsidiary of CNACG "CNAC" China National Aviation Company Limited, a company incorporated underthe laws of Hong Kong with limited liability, whose shares are listed on theStock Exchange and which is an approximately 68.4% directly-owned subsidiary ofthe Company "CNAC Announcement" the announcement of CNAC dated 20 March 2006 relating to,inter alia, the Airport Fees Transaction entered into between Air Macau andrelevant associates of STDM "CNACG" China National Aviation Corporation (Group) Limited, companyincorporated in Hong Kong with limited liability and is wholly owned by CNAH anda substantial shareholder of the Company "CNAH" China National Aviation Holding Company, a state-owned enterprise incorporated under the laws of the PRC and the ultimate controlling shareholder of the Company "Company" Air China Limited, a joint stock limited company incorporated underthe laws of the PRC with limited liability, whose H shares are listed on theStock Exchange and the London Stock Exchange, plc "Dragonair" Hong Kong Dragon Airlines Limited, an airline operator incorporatedin Hong Kong with limited liability and a 43.29% owned associated company of theCompany "Group" the Company and its subsidiaries "Hong Kong" the Hong Kong Special Administrative Region of the PRC "HK$" Hong Kong dollars, the lawful currency of Hong Kong "Listing Rules" The Rules Governing the Listing of Securities on the StockExchange "Macau" The Macau Special Administrative Region of the PRC "Macau Government" The Government of Macau "MIAC" Macau International Airport Company "MOP" Macau Patacas, the lawful currency of Macau "PRC" The People's Republic of China "Proposed Airport License" the finalized airport license to be entered intobetween Air Macau and MIAC in respect to the license of certain floor space byAir Macau at the Macau International Airport "STDM" Sociedade de Turismo e Diversoes de Macau, a company incorporated inMacau "Stock Exchange" The Stock Exchange of Hong Kong Limited In this announcement, except as otherwise indicated, MOP has been translatedinto HK$ at the rate of HK$1.00 = MOP1.03 for reference purpose only. By Order of the BoardAir China LimitedZheng Baoan Li Man KitJoint Company Secretaries Beijing, 20 March 2006 As at the date of this announcement, the directors of the Company are Messrs LiJiaxiang, Kong Dong, Wang Shixiang, Yao Weiting, Ma Xulun, Cai Jianjiang, Fan Cheng, Hu Hung Lick, Henry*, Wu Zhipan* and Zhang Ke*. * Independent non-executive director of the Company This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Air China