TIDMAIRC
RNS Number : 1841R
Air China Ld
03 November 2021
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 2018 Circular in relation to the
continuing connected transactions of the Company. At the 2018 EGM,
the Independent Shareholders approved certain continuing connected
transactions of the Company and their relevant annual caps for the
three years ending 31 December 2021 which are required to be
approved by the Independent Shareholders under the Shanghai Listing
Rules. The Company expected certain continuing connected
transactions set out in the 2018 Circular will continue to be
conducted after 31 December 2021, 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 2022 to 31 December 2024) in
accordance with the Hong Kong Listing Rules.
On 29 October 2021, the Board approved the continuing connected
transactions set out in this announcement and the annual caps for
each of them for the three years ending 31 December 2022, 2023 and
2024.
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 the Independent Shareholders' approval for the continuing
connected transactions under the Government Charter Flight Service
Framework Agreement, the Comprehensive Services Framework
Agreement, the Properties Leasing Framework Agreement, the
Construction Project Commissioned Management Framework Agreement
and the 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 12 November
2021.
1. INTRODUCTION
Reference is made to the 2018 Circular in relation to, among
other things, the continuing connected transactions of the Company.
At the 2018 EGM, the Independent Shareholders approved certain
continuing connected transactions of the Company and their relevant
annual caps for the three years ending 31 December 2021 which are
required to be approved by the Independent Shareholders under the
Shanghai Listing Rules. The Company expected certain continuing
connected transactions set out in the 2018 Circular will continue
to be conducted after 31 December 2021, 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 2022 to 31 December 2024) in
accordance with the Hong Kong Listing Rules.
On 29 October 2021, the Board approved the continuing connected
transactions set out in this announcement and the annual caps for
each of them for the three years ending 31 December 2022, 2023 and
2024.
2. PARTIES AND CONNECTED RELATIONSHIP BETWEEN 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 directly holds 40.98% of the Company's shares and holds
10.72% of the Company's shares through its wholly-owned subsidiary
CNACG, and is a controlling shareholder of the Company. Therefore,
CNAHC is a connected person of the Company as defined under the
Hong Kong Listing Rules. As at the date of this announcement, The
State-owned Assets Supervision and Administration Commission of the
State Council is a controlling shareholder and de facto controller
of CNAHC. CNAHC primarily operates all the state-owned assets and
state-owned equity interests invested by the State in CNAHC and its
invested entities, aircraft leasing and aviation equipment and
facilities maintenance businesses.
-- 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
construction project implementation and supervision.
3. CONTINUING CONNECTED TRANSACTIONS
3.1. Government Charter Flight Services
The Company (as the carrier) and CNAHC (as the charterer)
entered into the Government Charter Flight Service Framework
Agreement on 29 October 2021.
Description of the transaction:
Pursuant to the Government Charter Flight Service Framework
Agreement, CNAHC shall use the charter flight services of the
Company (the "Government Charter Flight Services") for fulfilling
its government charter flight assignments.
The parties agreed that the parties will determine the price for
the Government Charter Flight Services through arm's length
negotiations between the parties based on the cost incurred by the
carrier in providing the Government Charter Flight Services adding
a reasonable profit (the reasonable profit margin generally ranges
from 5% to 10%). The costs include direct costs and indirect costs.
The initial term of the Government Charter Flight Service Framework
Agreement is from 1 January 2022 to 31 December 2024. Upon
expiration of the initial term, the Government Charter Flight
Service Framework Agreement may be renewed automatically for
successive terms of three years each, subject to the compliance
with the requirements of the Hong Kong Listing Rules/the Shanghai
Listing Rules and the approval procedures required under the Hong
Kong Listing Rules/the Shanghai Listing Rules. During the term of
the Government Charter Flight Service Framework Agreement, either
party may terminate the Government Charter Flight Service Framework
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 in China, the Company has
historically provided government related charter flight services to
State leaders, government delegates, national sports teams and
cultural envoys. As the designated government charter flight
carrier, the Company has gained significant brand recognition.
Pursuant to the Government Charter Flight Service Framework
Agreement, the Company may generate revenue from such transactions
based upon the cost-plus charging method.
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 CNAHC for the Company's provision of the Government Charter
Flight Services:
Historical Annual Historical Actual Amounts Proposed Annual
Caps Caps
Unaudited
Actual Actual historical
Annual Annual annual annual amount Estimated Annual Annual
cap cap Annual amount amount for annual cap cap Annual
for for cap for for the amount for for cap
Transaction the the for the the period for the the for
year year the year year from the year year the
ended ended year ended ended 1 January year ending ending year
31 31 ending 31 31 to 30 ending 31 31 ending
December December 31 December December December June 31 December December December 31 December
2019 2020 2021 2019 2020 2021 2021 2022 2023 2024
Amount RMB900 RMB900 RMB900 RMB487 RMB425 RMB0 RMB450 RMB900 RMB900 RMB900
payable million million million million million million million million million million
by CNAHC
for
the
Company's
provision
of
the
Government
Charter
Flight
Services
Due to the irregular and unpredictable demand for government
charter flights and the sudden outbreak of the pandemic in 2020,
there had been a decrease in the international charter flight
business after the implementation of the "Five-One" policy for
international flights by the Civil Aviation Administration,
resulting in lower-than-expected revenue from the charter flight
business of the Company from 2019 to 2021.
Basis for the annual caps for the next three years:
In arriving at the above annual caps, the Directors have
considered the historical and expected transaction amount for the
same type of transactions as set out in the table above. As China
further enhances its influence in the world, and the global impact
of the Covid-
19 pandemic will gradually diminish in the future, it is
expected that government's overseas visits will gradually resume
and continuously increase from 2022 to 2024, and the annual caps
for the revenue generated from government charter flights are
expected to be maintained at RMB900 million for each year from 2022
to 2024.
3.2. Comprehensive Services
The Company and CNAHC entered into the Comprehensive Services
Framework Agreement on 29 October 2021.
Description of the transaction:
Pursuant to the Comprehensive Services Framework Agreement:
-- The Group accepts CNAHC Group's appointment to provide CNAHC
Group with products or services including but not limited to
retiree management services, human resources services (including
general, servicing and consulting services in respect of personnel
employment, archival information, salaries and benefits, social
insurance and employee services), information technology services,
procurement services, training services, air passenger
transportation agency services and in-flight supplies.
For the relevant products or services provided by the Group to
CNAHC Group, the price to be charged by the Group will be
determined after arm's length negotiations between the parties on
the basis of the costs of the Group adding a reasonable service fee
(generally ranging from 3% to 10% of the costs) and/or with
reference to the price for the same type of products or services
provided by the Group to other parties under non-related
(non-connected) transactions.
-- CNAHC Group was appointed by the Group as the provider of
ancillary production services or the administrator of supply
services of the Group for which CNAHC Group shall provide the
following products or services to the Group including but not
limited to (provided that the provider has obtained the relevant
qualifications and certifications):
(1) on-board catering and food supply management services on global flights;
(2) operation and management services of office buildings;
(3) property management services in office buildings and the
regions at which the office buildings are located including but not
limited to Beijing, Chengdu, Chongqing, Shanghai, Hangzhou,
Guangzhou, Wuhan and Hohhot; and the services of which include but
not limited to cleaning services, plantation services, laundry
services, parking management services, procurement and repair
services, energy management and other services;
(4) support services for resident group, support services for
delayed flights passengers and scenario mileage payment
products;
(5) catering support and cleaning services for check-in area and
lounge for high- end passengers at terminals;
(6) other commissioned services.
For the above mentioned products or services to be provided by
CNAHC Group to the Group, the parties shall, according to the
service items and specific needs, determine the relevant service
fees through arm's length negotiations in accordance with the
following principles: (i) the final transaction price shall be
determined after arm's length negotiations between the parties
based on the quotations provided by CNAHC Group, with reference to
the market price (if any) for the same type of services available
from at least two independent third parties in the market and take
into account factors including the service standard, service scope,
business volume and specific needs of the parties; and/or (ii) the
service fee shall be determined after arm's length negotiations
between the parties based on the costs of CNAHC Group adding a
reasonable service fee, and offering rewards or imposing penalties
depending on the management of CNAHC Group, the final settlement of
which shall be made on the basis of the actual transaction amount.
In the case of item (ii), CNAHC Group shall provide information
including but not limited to its own costs, external procurement
and actual settlement conditions. The service fee received by CNAHC
Group shall not exceed 10% of the costs, and shall be determined
mainly by reference to the historical average prices released in
relevant industry for similar products or services (where
possible), and/or the profit margin of the comparable products or
services disclosed by other listed companies.
-- CNAHC Group was engaged by the Group as one of the providers
of ancillary production or supply services of the Group, which
CNAHC Group shall provide the Group with the following products or
services including but not limited to (provided that the provider
has obtained the relevant qualifications and certifications):
(1) hotel accommodation and staff recuperation services;
(2) air ticket printing services and other printed materials;
(3) air passenger transportation agency services;
(4) other services such as airline catering services and
provision of all kinds of on- board services supplies.
For the above mentioned products or services to be provided by
CNAHC Group to the Group, the Group will determine the relevant
service fees through arm's length negotiations with CNAHC Group in
accordance with the following principles:
(1) if government-set or guided price is available,
government-set or guided price shall be adopted;
(2) in the absence of government-set or guided price, the final
transaction price shall be determined after arm's length
negotiations between the parties with reference to the market price
(if any) for the same type of products or services available from
at least two independent third parties in the market, by taking
into account certain factors including the service standard,
service scope, business volume and specific needs of the parties.
If the service demand of the service recipient changes, the
transaction price shall be adjusted appropriately through
negotiations between the parties based on the extent of changes in
relevant costs, service quality or other factors;
(3) if open market price is not available or there are no
identical or similar business activities in the market, the parties
shall settle the actual transaction amount based on the costs of
CNAHC Group adding a reasonable service fee, and offering rewards
or imposing penalties depending on the management of CNAHC Group.
CNAHC Group shall provide information including but not limited to
its own cost, external procurement and actual settlement
conditions. The service fee received by CNAHC Group shall not
exceed 10% of the costs, and shall be determined mainly by
reference to the historical average prices released in relevant
industry for similar products or services (where possible) and/or
the profit margin of the comparable products or services disclosed
by other listed companies.
-- The Group and CNAHC Group commission each other for the human
resources sharing business within the two groups. In principle, the
transaction price shall be determined through arm's length
negotiations between the parties based on the labor costs incurred,
and the transaction price shall be fully borne by the worksite
employer.
In the process of renewing the continuing connected transaction
agreements, for the purpose of better managing the related
business, the Company and CNAHC would no longer renew the sales
agency services framework agreement dated 30 October 2018 (the
"Sales Agency Services Framework Agreement"). The passenger
transportation agency services provided by CNAHC Group to the Group
pursuant to the Sales Agency Services Framework Agreement shall be
included in and governed by the Comprehensive Services Framework
Agreement, and the cargo sales agency service provided by CNAHC
Group to the Group pursuant to the Sales Agency Services Framework
Agreement has been included in and governed by the continuing
connected transaction framework agreement ("ACC Framework
Agreement") entered into between the Company and Air China Cargo on
30 October 2019.
The initial term of the Comprehensive Services Framework
Agreement is from 1 January 2022 to 31 December 2024. Upon
expiration of the initial term, the Comprehensive Services
Framework Agreement may be renewed automatically for successive
terms of three years each, subject to the compliance with the
requirements of the Hong Kong Listing Rules/the Shanghai Listing
Rules and the approval procedures required under the Hong Kong
Listing Rules/the 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:
As the Group possesses service qualification and excellent
professional capabilities in professional fields such as retiree
management and human resources services, CNAHC Group is willing to
continue to cooperate with the Company in relevant businesses.
For the aforementioned services to be provided by CNAHC Group,
the Directors believe that CNAHC Group has strengths that
independent third parties in the market do not possess, including
(1) knowledge of the aviation industry; (2) a proven track record
of quality and timely service provided in the past; (3) the sites
at which services are provided by CNAHC Group are generally in
close proximity to the Company, and therefore CNAHC Group is in a
position to offer highly efficient services. In light of the
aforementioned factors, the Directors believe that it is in the
best interest of the Group to enter into the above transactions
with CNAHC.
Historical Amounts and Proposed Caps:
Set forth below is a summary of the historical annual caps for
and the actual total amounts paid and received by the Group to and
from CNAHC Group in accordance with the comprehensive services
framework agreement dated 30 October 2018, and the proposed annual
caps for the total amount payable and receivable by the Group to
and from CNAHC Group in accordance with the Comprehensive Services
Framework Agreement:
Historical Annual Historical Actual Amounts Proposed Annual
Caps Caps
Unaudited Estimated
Actual Actual historical annual
Annual Annual Annual annual annual amount amount Annual Annual Annual
cap for cap for cap for amount amount for the for cap for cap for cap for
the year the year the year for the for the period the year the year the year the year
Transactions ended ended ended year year from ending ending ending ending
31 31 31 December ended ended 1 January 31 December 31 31 31 December
December December 2021 31 31 to 30 2021 December December 2024
2019 2020 December December June 2022 2023
2019 2020 2021
Amount RMB2,100 RMB2,500 RMB3,000 RMB1,483 RMB967 RMB577 RMB1,935 RMB2,650 RMB2,750 RMB2,780
payable million million million million million million million million million million
by the Group
Amount Below the de minimis RMB5 RMB15 RMB14 RMB30 RMB100 RMB110 RMB121
receivable threshold as stipulated million million million million million million million
by the Group under Rule 14A.76(1)(a)
of the Hong Kong
Listing Rules
As affected by the pandemic in 2020, both international and
domestic transport capacity declined significantly, and hence the
supply of in-flight meals and amenities correspondingly decreased
by a large extent. Furthermore, facing the impact of the pandemic,
the Company enhanced refined management on rigid costs and
controllable expenses. The interplay of the above factors has
caused the actual amounts paid by the Group to CNAHC Group decrease
substantially as compared with the annual caps.
Basis for the annual caps for the next three years:
In arriving at the annual caps for the amount payable by the
Group to CNAHC Group in accordance with the Comprehensive Services
Framework Agreement, the Directors have considered the historical
transaction amount for the same type of transactions and the
expected growth of the Group's air passenger services in the next
few years. Considering that (i) it is expected that the Group's
transport capacity will gradually return to the pre- pandemic level
in the next three years, so that the Group's demand for ancillary
production and supply services such as on-board service supplies,
airline catering services and aviation ground services will also
gradually return to the pre-pandemic level and continue to
increase, and the transaction amount payable to CNAHC Group under
the Comprehensive Services Framework Agreement is expected to
increase accordingly; (ii) the expected increase in labour cost in
the next three years will also result in the increase in
transaction amount; (iii) the inclusion of catering support and
cleaning services at terminals into the Comprehensive Services
Framework Agreement is expected to increase the transaction amount
by approximately RMB150 million to RMB200 million each year;
(iv) the increase in related costs resulting from the Group's
new businesses in the next three years. Taking into account the
above mentioned factors, it is expected that the amount payable by
the Group to CNAHC Group in 2022 under the Comprehensive Services
Framework Agreement shall not exceed RMB2,650 million and shall not
exceed RMB2,750 million and RMB2,780 million in 2023 and 2024,
respectively.
In arriving at the annual caps for the amount payable by CNAHC
Group to the Group in accordance with the Comprehensive Services
Framework Agreement, the Directors have considered (i) the addition
of services such as human resources management provided by the
Group which is expected to result in an increase in the expenditure
of transaction amount of CNAHC Group under the Comprehensive
Services Framework Agreement accordingly; (ii) the expected
increase in labour cost in the next three years will also result in
an increase in the transaction amount. Taking into account the
abovementioned factors, it is expected that the amount receivable
by the Group from CNAHC Group in 2022 under the Comprehensive
Services Framework Agreement shall not exceed RMB100 million, and
shall not exceed RMB110 million and RMB121 million in 2023 and
2024, respectively.
3.3. Property Leasing
The Company and CNAHC entered into the Properties Leasing
Framework Agreement on 29 October 2021.
Description of the transaction:
Pursuant to the Properties Leasing Framework Agreement, the
Group and CNAHC Group agreed to lease from each other certain
properties (including ancillary facilities) and land use rights
owned by each other for their respective production and operation,
office and storage use.
-- The Group (as lessor) may rent out its own properties
(including properties constructed by the Group or customized upon
the request of CNAHC Group) or land with legal use rights to CNAHC
Group for its production and operation, office and storage use. The
pricing principles and conducting of the transaction shall be as
follows:
First, the Group shall provide quotation for the leased
properties or land to CNAHC Group after taking into account the
factors including the relevant costs, tax and reasonable profit
margin relating to the properties or land. The related costs
include, among others, construction costs, depreciation costs,
funding costs and maintenance costs. The reasonable profit margin
is usually around 10%, mainly with reference to the historical
average price for similar services (where possible) released in the
property leasing industry and/or the profit margin of comparable
services disclosed by other listed companies.
Then, the rent payable for the leased properties or land shall
be determined through arm's length negotiations between the Group
and CNAHC Group after CNAHC Group takes into account the factors
such as the location of the leased properties or land and the
service quality. Such rent shall not be lower than the rent offered
by the Group to an independent third party (if any) in comparable
circumstances.
-- The Group (as lessee) may lease properties owned by CNAHC
Group and land with legal use right from CNAHC Group based on its
production and operation, office and storage needs. The pricing
principles and conducting of the transaction shall be as
follows:
First, the Group shall conduct market research and collect,
consolidate and analyze information in respect of provision of
leasing services by independent third parties for the same type of
properties or land (if any) in close proximity to the properties or
land. Generally, the Group shall assign a department or an officer
to verify the price and terms available from at least two
independent third parties (if any) by email, fax or telephone.
Then, (i) if there is comparable market of the same type found
through market research, the parties shall determine the rental
prices for the leased properties or land through arm's length
negotiations with reference to the market price for the same type
of services available from at least two independent third parties
and take into account certain factors. The relevant factors
include, among others, the location, function and layout,
furnishing, ancillary facilities and property management of the
property or land as well as the specific needs of the lessee; (ii)
if there is no comparable market of the same type found in the
neighboring areas through market research, the price shall be
determined by adopting the cost-plus approach: the rental price of
the leased properties or land shall be determined through arm's
length negotiations between the parties based on the relevant
costs, tax and reasonable profit margin of the properties or land
offered by CNAHC Group. The relevant costs include, among others,
construction costs, depreciation costs, funding costs and
maintenance costs. The reasonable profit margin shall be determined
mainly with reference to the historical average price of similar
services (where possible) released
in the property leasing industry and/or the profit margin of
comparable services disclosed by other listed companies, and the
reasonable profit margin of CNAHC Group shall not exceed 10%. The
abovementioned rental prices shall not be higher than those offered
by CNAHC Group to the independent third parties (if any) in
comparable circumstances.
When leasing each other's properties or land, the parties may
determine the price for leasing their respective properties or land
based on the above pricing principles, and then exchange the
properties or land use right in accordance with the principle of
equivalent exchange.
Pursuant to the Properties Leasing Framework Agreement, the
leasing term of properties or land for both parties shall not
exceed three years. However, (i) if there are specific government
and/or industry requirements, the leasing term of properties or
land shall comply with such requirements; or (ii) if the
property(ies) is/are custom built by the Group according to the
requirements of CNAHC Group, the leasing term of the property(ies),
in principle, shall not exceed the useful life of the leased
property(ies).
The initial term of the Properties Leasing Framework Agreement
is from 1 January 2022 to 31 December 2024. Upon expiration of the
initial term, the Properties Leasing Framework Agreement may be
renewed automatically for successive terms of three years each,
subject to the compliance with the requirements of the Hong Kong
Listing Rules/the Shanghai Listing Rules and the approval
procedures required under the Hong Kong Listing Rules/the Shanghai
Listing Rules. During the term of the Properties Leasing Framework
Agreement, either party may terminate the Properties Leasing
Framework Agreement on any 31 December by giving the other party at
least three months' written notice.
Reasons for the 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 and proposed caps:
Set forth below is a summary of the historical annual caps for
and actual rent paid and received by the Group to and from CNAHC
Group under the properties leasing framework agreement dated 30
October 2018, and the proposed annual caps for the rent payable and
receivable by the Group to and from CNAHC Group under the
Properties Leasing Framework Agreement:
Transactions Historical Annual Historical Actual Amounts Proposed Annual
Caps Caps
Estimated
Actual Actual Unaudited annual
Annual Annual Annual annual annual historical amount Annual Annual Annual
cap for cap for cap for amount amount amount for cap for cap for cap for
the year the year the year for the for the for the the year the year the year the year
ended ended ending year year period ending ending ending ending
31 31 31 December ended ended from 31 December 31 31 31 December
December December 2021 31 31 1 January 2021 December December 2024
2019 2020 December December to 30 2022 2023
2019 2020 June
2021
Total value RMB500 RMB550 RMB620 RMB137 RMB34 RMB17 RMB300 RMB350 RMB370 RMB390
of right-of- million million million million million million million million million million
use assets
relating
to the leases
entered into
by the Group
as the lessee
in accordance
with the
Properties
Leasing
Framework
Agreement
Note
Total annual Below the de minimis RMB3 RMB3 RMB1 RMB29 RMB150 RMB166 RMB176
rent threshold as stipulated million million million million million million million
receivable under Rule 14A.76(1)(a)
by the Group of the Hong Kong
as the lessor Listing Rules
(excluding
the
belowmentioned
Single Rent)
Single Rent N/A 0 RMB230 RMB330
recorded million million
by the Group
in relation
to the
leasing
of Customized
Properties
under the
Properties
Leasing
Framework
Agreement
Note: As International Financial Reporting Standard 16 "Lease"
took effect from 1 January 2019 and became 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 2022, 2023 and 2024 are set based on the
total value of right-of-use assets relating to the leases entered
into by the Group.
Basis for the annual caps for the next three years:
In arriving at the above annual caps for the total value of
right-of-use assets relating to the leases to be entered into by
the Group acting as lessee in accordance with the Properties
Leasing Framework Agreement, the Directors have considered (i) the
historical transaction amount for the same type of transactions;
(ii) the future growth of rent payable by the Group to CNAHC Group
(estimated to be approximately 5% per year) and the increase in
demand for leasing arising from the business development of the
Group. Therefore, it is expected that the total future annual rent
to be paid by the Group to CNAHC Group from 2022 to 2024 will not
exceed RMB120 million, RMB132 million and RMB145 million,
respectively. On such basis, the value of right-of-use assets
calculated by discounting the estimated total annual rent of the
future years using the incremental borrowing rate of the Group as
the discount rate from 2022 to 2024 are expected to be not
exceeding RMB350 million, RMB370 million and RMB390 million,
respectively.
In arriving at the above annual caps for the annual total rent
payable by CNAHC Group to the Group in accordance with the
Properties Leasing Framework Agreement, considering the Company
intends to include the lease of property(ies) which is/are subject
to the supervision and administration of the General Administration
of Customs of the PRC (the "GAC Regulated Property(ies)") by Air
China Cargo (as lessee) from the Company (as lessor) under the ACC
Framework Agreement into the Properties Leasing Framework Agreement
for the purpose of centralized management starting from 2022, the
relevant rental income is therefore expected to increase in the
next three years. As such, it is expected that the annual rent
payable by CNAHC Group to the Group from 2022 to 2024 under the
Properties Leasing Framework Agreement will not exceed RMB150
million, RMB166 million and RMB176 million, respectively.
In addition, the Group expects to enter into customized leasing
transactions with CNAHC Group in accordance with the Properties
Leasing Framework Agreement in the next three years. That is, the
Group will build property(ies) ("Customized Property(ies)") on the
land to which the Group has the use right according to CNAHC
Group's request, and lease out the Customized Property(ies) to
CNAHC Group and commence the leasing terms thereof following the
completion of the construction. The rent of such leasing
transactions comprises of the single rent to be charged prior to
the commencement of the leasing term and accounted for as a finance
lease from the inception of the leasing term (which generally
equals to the construction costs of the property(ies)) (the "Single
Rent") and the annual rent to be paid upon the commencement of the
leasing term (the "Annual Rent"). The Annual Rent has been included
in the annual caps for the total rent payable by CNAHC Group to the
Group under the Properties Leasing Framework Agreement. In respect
of the Single Rent, since the Single Rent will be accounted for as
a finance lease at the inception of the leasing term, the Company
will therefore set the annual transaction cap for the Single Rent
with reference to the mechanism of setting a cap for finance lease
transactions. Based on the current estimation, the potential
Customized Property(ies) transactions to be entered into between
the Group and CNAHC Group in the next three years include the new
catering building at Hangzhou Xiaoshan International Airport
proposed by CNAHC Group (the "Hangzhou Catering Building Project")
and the new catering buildings at Beijing Capital International
Airport and Tianjin Binhai International Airport proposed by CNAHC
Group (the "Beijing and Tianjin Catering Building Project"). Having
considered the estimated construction cost and the timing of
inception of leases of the above projects (in particular, it is
expected that the leases under the Hangzhou Catering Building
Project and Beijing and Tianjin Catering Building Project will
commence in 2023 or 2024 and 2024, respectively), as well as taking
into account a buffer, it is expected that the Single Rent to be
recorded by the Group for leasing
the Customized Property(ies) in relation to the Properties
Leasing Framework Agreement for 2023 and 2024 will not exceed
RMB230 million and RMB330 million, respectively.
Independent Financial Adviser's opinion on the terms of the
agreement:
As mentioned above, under the Properties Leasing Framework
Agreement, the leasing term of the properties or land should not
exceed three years with the exception that (i) there are special
government and/or industry requirements so the leasing term of the
property(ies) or land shall comply with such requirements
("Regulated Property(ies)"); or (ii) the leased property(ies)
is/are Customized Property(ies), the leasing term of the
property(ies), in principle, shall not exceed the useful life of
the leased property(ies).
As mentioned above, the Company intends to include the lease of
GAC Regulated Property(ies) by Air China Cargo (as lessee) from the
Company (as lessor) from the ACC Framework Agreement into the
Properties Leasing Framework Agreement for the purpose of
centralized management. The initial leasing term of the GAC
Regulated Property(ies) shall exceed three years which is mainly
due to the compulsory administrative regulations of the General
Administration of Customs of the PRC. Therefore, the GAC Regulated
Property(ies) is/are the Regulated Properties.
According to Rule 14A.52 of the Hong Kong Listing Rules, the
period for the agreement for a continuing connected transaction
must not exceed three years except in special circumstances where
the nature of the transaction requires a longer period. In this
case, the listed issuer must appoint an independent financial
adviser to explain why the agreement requires a longer period and
to confirm that it is normal business practice for agreements of
this type to be of such duration. Accordingly, the Company has
engaged BaoQiao Partners as the Independent Financial Adviser.
BaoQiao Partners has formulated its opinion based on its researches
and analysis and its discussion with the management of the Company
in respect of the lease terms of both Regulated Property(ies) and
Customized Property(ies) as follows:
Leases of Regulated Properties to have a duration longer than
three years
(i) Due to the business nature of the Group and CNAHC Group,
some of the properties owned by the Group and CNAHC Group (i.e.
offices and warehouses) in close proximity to the airports are
located in areas and/or belong to property types that are subject
to the oversight and administration of specific government or
industrial regulations and the requirements of the corresponding
government or industrial authorities on the duration of the tenure
when leased.
(ii) BaoQiao Partners noted that there are existing leasing
contracts of the Company with Air China Cargo, a connected person
of the Company, on properties subject to the oversight and
administration of the General Administration of Customs of the PRC.
Based on BaoQiao Partners' review of the Measure of the PRC for the
General
Administration of Places under Customs Supervision General (
) issued by the Administration of Customs of the PRC
effective
from 1 March 2008, and noted that the lease term of property for
the use of loading, unloading, storage, delivery and shipping of
import and export goods in the areas that are subject to the
oversight and supervision of the GAC is required to be at least
five years. In this regard, it is normal business practice with
regards to the compliance with applicable government/industrial
regulations or requirements for the lease term of the lease
agreements to be over three years.
(iii) The lease terms for the Regulated Properties are subject
to the requirements under specific government or industrial
regulations, and the entering into leases of the Regulated
Properties will allow the Company to obtain the right of use of the
Regulated Properties owned by CNAHC Group for the Group's
operation, while also providing the flexibility for the Group to
lease out its vacant Regulated Properties for rental income.
Leases of Customized Properties to have a duration longer than
three years
(i) As advised by the management of the Company, as the Group
and CNAHC Group operate in related business sectors, both groups
have similar demands on certain type of properties and/or
properties in specific areas (for example, properties within or
adjacent to airports) owned by each other.
(ii) Based on the Customized Properties leasing arrangement, the
Group will, upon request of CNAHC Group, build Customized
Properties on the land to which the Group has the right of use, and
then lease out the Customized Properties to CNAHC Group and
commence the lease terms thereof following the completion of such
Customized Properties. The design and construction costs of the
Customized Properties will be borne by CNAHC Group.
(iii) As CNAHC Group (as the lessee) will be incurring
substantial capital expenditure for building and construction of
the Customized Properties, it would be commercially justifiable for
CNAHC Group to request for longer lease terms (which would be
reference to the useful life of such Customized Properties) to
ensure stable and smooth operations and justifiable costs for
building the Customized Properties;
(iv) From the perspective of the Company as the lessor, the
Customized Properties leasing arrangement will allow the Company to
obtain the property rights of the Customized Properties and thus,
enhance the value of the idle land(s) and the asset base of the
Company. In addition, it would be commercially reasonable to have
the longer lease tenure (which would be reference to the useful
life of such Customized Properties) for such properties taking into
account (i) the time of construction of the Customized Properties
(i.e. one to two years as advised by the management of the
Company); and (ii) it would be difficult to lease the idle lands or
such purpose-built buildings to other external parties given the
business nature of the Company and CNAHC Group;
Review of comparable transactions
(i) BaoQiao Partners has reviewed the continuing connected
transaction announcements published by companies listed on the Hong
Kong Stock Exchange since 2018, and noted that there were similar
framework agreements to the Property Leasing Framework Agreement,
of which the lease term exceeded three years. The properties under
these framework agreements include production facilities,
commercial properties and offices which are relevant to their
respective operations and the framework agreements to lease these
premises have a duration term of up to 15 years.
(ii) BaoQiao Partners has also researched from publicly
available information by listed companies within the Chinese
aviation industry listed on the Hong Kong Stock Exchange since
2018. BaoQiao Partners noted that a peer of the Company (the "Peer
Company") has entered into leasing agreements in 2020 for
properties similar to the Customized Properties that are
purpose-built by the Peer Company according to the requirements of
the counterparty (with the Peer Company as lessor) or purpose-built
by the counterparty according to the requirements of the Peer
Company (with the Peer Company as lessee). BaoQiao Partners noted
that such properties have a tenure of up to 30 years.
Having considered the principal factors discussed above, BaoQiao
Partners is of the view that it is normal business practice for the
Group and CNAHC Group to enter into leases for the Regulated
Properties and the Customized Properties under the Properties
Leasing Framework Agreement with terms of more than three years and
to be of such duration for agreements of this type.
3.4. Media Services
The Company and CNAMC entered into the Media Services Framework
Agreement on 29 October 2021.
Description of the transaction:
Pursuant to the Media Services Framework Agreement,
-- CNAMC has agreed to provide Media Services to the Group. Of
which, the Company grants CNAMC an exclusive right to distribute
in-flight reading materials, movies, TV series, music, sound effect
and other cultural contents.
-- the Company has commissioned CNAMC as the general service
provider with respect to the Media Services of the Company which
CNAMC shall provide the Company with the following Media Services
(the "Entrusted Services"):
(1) in-flight entertainment system business and in-flight network platform business;
(2) brand communication and product marketing business:
including but not limited to brand research, consultation and
planning, design and copywriting planning, print film and
television production, public relation activities, media adverting,
promotion materials and IP image production and management, social
media operation and maintenance and intelligent property
management;
(3) news and publicity business, including but not limited to
external media operation and maintenance and internal newspaper
production;
(4) advertisement management business and media cooperation and management business;
(5) other Media Services entrusted by the Company.
For abovementioned businesses, the Group will make reference to
the service items and specific requirements, and (i) the parties
shall determine the final transaction price through arm's length
negotiations based on the quotations provided by CNAMC with
reference to the market price (if any) for the same type of
services available from at least two independent third parties
after taking into account factors including the service standard,
service scope, business volume and specific needs of the parties;
and/or (ii) the service fees shall be determined after arm's length
negotiations between the parties based on the costs of CNAMC adding
a reasonable service fee, and offering rewards or imposing penalty
depending on the management of CNAMC, the final settlement of which
shall be made on the basis of the actual transaction amount. CNAMC
shall provide information including but not limited to costs,
external procurement conditions and actual settlement conditions,
and the service fee received by CNAMC shall not exceed 10% of the
costs and shall be determined mainly with reference to the
historical average prices released in relevant industries for
similar products or services (where possible) and/or profit margin
of the comparable products and services.
-- In respect of the media products or services other than the
Entrusted Services that are purchased by the Company from CNAMC,
the Group shall determine and pay the relevant services fees in
accordance with the following principles and the arm's length
negotiations with CNAMC:
(1) if government-set or guided price is available,
government-set or guided price shall be adopted;
(2) in the absence of government-set or guided price, the final
transaction price shall be determined after arm's length
negotiations between the parties based on the quotation provided by
CNAMC with reference to the market price (if any) for the same type
of services available from at least two independent third parties
in the market after taking into account certain factors including
the service standard, service scope, business volume and specific
needs of the parties;
(3) if open market price is not available or there are no
identical or similar business activities in the market, the parties
shall settle the actual transaction amount based on the costs of
CNAMC adding a reasonable service fee, and offering rewards or
imposing penalties depending on the management of CNAMC. CNAMC
shall provide information including but not limited to costs,
external procurement and actual settlement conditions, and the
service fee received by CNAMC shall not exceed 10% of the costs and
shall be determined mainly with reference to the historical average
prices released in relevant industry for similar products or
services (where possible) and/or profit margin of the comparable
products and services.
-- In respect of the Company's media used by CNAMC in operating
the Media Services, CNAMC shall pay the Company an annual media
resource fee of RMB13.8915 million for each of the three years of
2022, 2023 and 2024 as per the comparable market prices of the
media resources.
The Company will enter into relevant business agreements with
CNAMC in accordance with its business requirements. The Company is
responsible for business implementation standards, business
requirements, budgeting and evaluation, and CNAMC is responsible
for the overall business implementation. If CNAMC provides the
Media Services to subsidiaries of the Company, the parties shall
enter into relevant business agreements in accordance with the
principles contemplated under the Media Services Framework
Agreement.
The initial term of the Media Services Framework Agreement is
from 1 January 2022 to 31 December 2024. Upon expiration of the
initial term, the Media Services Framework Agreement may be renewed
automatically for successive terms of three years each, subject to
the compliance with the requirements of the Hong Kong Listing
Rules/the Shanghai Listing Rules and the approval procedures
required under the Hong Kong Listing Rules/ the Shanghai Listing
Rules. During the term of the Media Services Framework Agreement,
either party may terminate the Media Services Framework Agreement
on any 31 December by giving the other party at least three months'
written notice.
Reasons for the transaction:
The Directors believe that it is in the best interest of the
Company to enter into the above transaction with CNAMC since:
-- media and advertising business is not the core competency of
the Company while CNAMC has extensive experience in in-flight
advertising operation and has proven channels of advertising
sponsors to draw upon;
-- as a longstanding company having engaged in the aviation
media business, CNAMC possesses professional qualifications and
teams 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 for
and the actual amounts paid by the Group to CNAMC under the media
services framework agreement dated 30 October 2018, 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
historical Estimated
Annual Annual Annual Actual Actual amount annual Annual Annual Annual
cap cap cap annual annual for amount cap cap cap
for for for amount amount the for for for for
Transaction the the the for for period the the the the
year year year the the from year year year year
ended ended ended year year 1 ending ending ending ending
31 31 31 ended ended January 31 31 31 31 December
December December December 31 31 to 30 December December December 2024
2019 2020 2021 December December June 2021 2022 2023
2019 2020 2021
Amount RMB550 RMB700 RMB750 RMB221 RMB114 RMB69 RMB199 RMB400 RMB500 RMB600
payable million million million million million million million million million million
by the Group
The actual amount paid by the Group to CNAMC in the years from
2019 to 2021 in respect of receiving the Media Services was
substantially lower as compared to the annual caps of the
respective years which was mainly attributable to the combined
effect of the following factors: (i) the significant decrease in
the procurement of aviation media business such as in-flight video
and audio programmes and adverting agency by the Group as a result
of significant decrease in scale of the international and domestic
transport capacity caused by the pandemic; (ii) the refined
management strengthened by the Company in respect of rigid costs
and controllable fees against the impact of the pandemic.
Basis for the annual caps for the next three years:
In arriving at the annual caps of the amounts to be paid by the
Group to CNAMC in accordance with the Media Services Framework
Agreement, 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: (i) it is
expected that the scale of transport capacity of the Group will
gradually return to the pre-pandemic level for the next three
years, the need of the Group for aviation media businesses such as
in-flight video and audio programmes and advertising agency will
increase accordingly; (ii) the Company's service development
strategy requires continuous enhancement of its service quality.
Therefore, the Company will gradually restore and increase its
investment in the purchase, production, promotion and dissemination
of aviation media material. As a result of the above factors, it is
expected that the transaction amount from 2022 to 2024 will
increase. Based on the estimated transaction amount to be paid by
the Group to CNAMC in 2021 and given the abovementioned business
growth, it is expected that the transaction amount will not exceed
RMB400 million, RMB500 million and RMB600 million for 2022 to 2024,
respectively.
For each of the three years ending 31 December 2022, 2023 and
2024, the aggregate annual amount payable by CNAMC to the Group
under the Media Services Framework Agreement is 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.
3.5. Construction Project
The Company and CNACD entered into the Construction Project
Commissioned Management Framework Agreement on 29 October 2021.
Description of the transaction:
Pursuant to the Construction Project Commissioned Management
Framework Agreement, CNACD Group is commissioned by the Company to
serve as a manager of the construction projects and establish
project department. CNACD Group shall provide management services
for the Company's projects based on project characteristics using
its industry expertise and professional skills. The management
includes the management at the early stage, management during the
implementation of the project and management at the late stage. The
subsidiaries of the Company may also commission CNACD Group to
carry out the project management work.
CNACD Group receives service fees based on the size of or
investment in the projects in accordance with the commissioned
management scope, and the service fees shall be calculated as per
actual expenses and rewards and penalties-related expenses on a
full- labor cost basis (including reward for labor cost budget
surplus, rewards and penalty for construction period management and
reward and penalty for investment control balance) based on the
human resources invested by CNACD Group as verified by the Company,
and the particulars to be specified in relevant agreements. In
particular, the reward for labor cost budget surplus is based on
the comparison between the annual full labor cost budget approved
by the human resources department of both parties and the finance
department of the Company and the actual utilization, and if there
is a balance, the corresponding reward will be given according to
the balance. The reward and penalty for construction period
management refers to the corresponding incentive to be given to
CNACD Group by the Group's planning and development department and
other relevant departments after approval if CNACD Group completes
the construction period control targets of the various stages of
the project on schedule in accordance with the contractual schedule
control requirements on the premise that the project is
accident-free, the quality is acceptable and the investment within
the scope of management does not exceed the budget. On the
contrary, penalty will be imposed. The reward and penalty for
investment control balance refers to the corresponding reward or
penalty to CNACD Group for the balance of the total investment or
the corresponding amount in excess of the approved budget estimate
after the completion of the financial final account of the
infrastructure project on the premise that the project is
accident-free, the quality is acceptable and the construction
period is not exceeded.
The initial term of the Construction Project Commissioned
Management Framework Agreement is from 1 January 2022 to 31
December 2024. Upon expiration of the initial term, the
Construction Project Commissioned Management Framework Agreement
may be renewed automatically for successive terms of three years
each, subject to the compliance with the requirements of the Hong
Kong Listing Rules/the Shanghai Listing Rules and the approval
procedures required under the Hong Kong Listing Rules/the Shanghai
Listing Rules. During the term of the Construction Project
Commissioned Management Framework Agreement, either party may
terminate the Construction Project Commissioned Management
Framework Agreement on any 31 December by giving the other party at
least three months' written notice.
Reasons for the transaction:
The Directors believe that it is in the best interest of the
Group to enter into the transactions contemplated under the
Construction Project Commissioned Management Framework Agreement
with CNACD Group since:
-- CNACD Group specializes in construction projects relating to
the aviation industry which has extensive experience in
construction project management relating to the aviation industry,
and has excellent past cooperation with the Group;
-- Commissioned management is a management model commonly used
in large basic infrastructure construction projects. Outsourcing
construction project management enables the Group 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 for
and the actual amount payable by the Group to CNACD Group under the
basic construction project commissioned management framework
agreement dated 30 October 2018, and the proposed annual caps for
the amount payable by the Group to CNACD Group under the
Construction Project Commissioned Management Framework
Agreement:
Historical Annual Historical Actual Amount Proposed Annual
Caps Caps
Unaudited
historical Estimated
Annual Annual Annual Actual Actual amount annual Annual Annual Annual
cap cap cap annual annual for amount cap cap cap
for for for amount amount the for for for for
Transaction the the the for for period the the the the
year year year the the from year year year year
ended ended ended year year 1 January ending ending ending ending
31 31 31 December ended ended to 31 31 31 31 December
December December 2021 31 31 30 June December December December 2024
2019 2020 December December 2021 2021 2022 2023
2019 2020
Amount RMB120 RMB130 RMB130 RMB13 RMB44 RMB11 RMB67 RMB90 RMB90 RMB90
payable million million million million million million million million million million
by the Group
The commissioned project management fees actually paid to CNACD
were lower than expected due to the facts that the projects
originally planned to be newly started in 2019 have not been
carried out as scheduled, and that the construction progress of the
existing infrastructure projects slowed down due to the impact of
the pandemic in 2020.
Basis for the annual caps for the next three years:
In arriving at the above annual caps, the Directors have
considered that: (i) the commissioned management cost is expected
to increase since the construction progress of the corresponding
projects is expected to be accelerated in the future since the
schedule for such commenced projects was delayed and the
construction progress of the existing infrastructure projects
slowed down as affected by the pandemic; (ii) as its business
develops, the Company expects an increase in demand for new,
rebuilding and expansion, and maintenance projects over the next
three years. Therefore, it is expected that the transaction amount
from 2022 to 2024 will increase compared with that of the past. To
sum up, it is estimated that the total amount payable to CNACD
Group under the Construction Project Commissioned Management
Framework Agreement for each of the years from 2022 to 2024 will
not exceed RMB90 million.
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 with 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 subdivision responsible for
managing the 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 the 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, duration of
the agreement and the 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 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 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.
Mr. Song Zhiyong, Mr. Ma Chongxian, Mr. Feng Gang 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 above-mentioned
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 2022, 2023 and
2024 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) the Government Charter Flight Service Framework Agreement;
(2) the Comprehensive Services Framework Agreement;
(3) the Properties Leasing Framework Agreement;
(4) the Media Services Framework Agreement;
(5) the Construction Project Commissioned 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 12 November
2021.
DEFINITIONS
In this announcement, unless the context otherwise requires, the
following expressions have the following meanings:
"2018 Circular" the circular issued by the Company on 2 November
2018 to the Shareholders in respect of certain
continuing connected transactions
"2018 EGM" the Company's extraordinary general meeting
held on 18 December 2018
"Air China Cargo" Air China Cargo Co., Ltd., a non-wholly owned
subsidiary of CNAHC
"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
"CNACD Group" CNACD together with its subsidiaries and associates
"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 together with its subsidiaries and 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 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 the framework agreement for the continuing related
Framework Agreement" (connected) transactions of comprehensive services
entered into between the Company and CNAHC on
29 October 2021
"connected person" has the meaning ascribed to it by the Hong Kong
Listing Rules
"Construction Project Commissioned the framework agreement for the continuing related
Management Framework Agreement" (connected) transactions of commissioned management
of basic construction project entered into between
the Company and CNACD on 29 October 2021
"CSRC" the China Securities Regulatory Commission
"Director(s)" the director(s) of the Company
"Government Charter Flight the framework agreement for the continuing related
Service Framework Agreement" (connected) transactions of government charter
flight service entered into between the Company
and CNAHC on 29 October 2021
"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 Financial BaoQiao Partners Capital Limited, a corporation
Adviser" or "BaoQiao Partners" licensed to carry on Type 1 (dealing in securities)
and Type 6 (advising on corporate finance) regulated
activities under the Securities and Futures
Ordinance (Chapter 571 of the laws of Hong Kong),
being the independent financial adviser appointed
by the Company to advise the Board in respect
of the opinion required pursuant to Rule 14A.52
of the Hong Kong Listing Rules
"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 the framework agreement for the continuing related
Agreement" (connected) transactions of media services entered
into between the Company and CNAMC on 29 October
2021
"Percentage Ratio(s)" has the meaning ascribed to it by the Hong Kong
Listing Rules
"Properties Leasing Framework the framework agreement for the continuing related
Agreement" (connected) transactions of properties leasing
entered into between the Company and CNAHC on
29 October 2021
"RMB" Renminbi, the lawful currency of the PRC
"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
Huang Bin Huen Ho Yin
Joint Company Secretaries
Beijing, the PRC, 29 October 2021
As at the date of this announcement, the directors of the
Company are Mr. Song Zhiyong, Mr. Ma Chongxian, Mr. Feng Gang, Mr.
Patrick Healy, Mr. Xue Yasong, Mr. Duan Hongyi*, Mr. Stanley Hui
Hon-chung* and Mr. Li Dajin*.
* Independent non-executive director of the Company
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