Air China Regulatory News (AIRC)

11 Jul 2007 07:01

Air China Ld11 July 2007 The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracyor completeness and expressly disclaims any liability whatsoever for any loss whatsoever arising from or in reliance upon the whole or any part of the contents of this announcement. AIR CHINA LIMITED (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 753) DISCLOSEABLE TRANSACTION: PURCHASE OF 23 AIRBUS 320-SERIES AIRCRAFT On 10 July 2007 the Company and AIE entered into the Airbus Aircraft Purchase Agreement with Airbus Company, pursuant to which the Company has agreed to purchase 23 Airbus 320-series aircraft from Airbus Company. The Transaction constitutes a discloseable transaction of the Company under the Listing Rules. The Company shall, pursuant to the Listing Rules, dispatch a circular containing the information required under the Listing Rules in relation to the Transaction within 21 days after the publication of this announcement. AIRBUS AIRCRAFT PURCHASE AGREEMENT On 10 July 2007 the Company and AIE entered into the Airbus Aircraft Purchase Agreement with Airbus Company, pursuant to which the Company has agreed to purchase 23 Airbus 320-series aircraft from Airbus Company. The Airbus Aircraft Purchase Agreement was entered into pursuant to a framework agreement entered into between Airbus Company and the China Aviation Supplies Import and Export Group Corporation on 26 October 2006 (the 2006 Framework Agreement). The details of the Transaction are summarized as follows: Date of the Transaction: 10 July 2007 Parties to the Transaction: (i) the Company, as the purchaser, the principal business activity of which is air passenger, air cargo and airline-related services; (ii) AIE, as the import agent for the Company; and (iii) Airbus Company, as the vendor, one of whose principal business activity is aircraft manufacturing. The Company confirms that, to the best of the Directors' knowledge, information and belief having made all reasonable enquiry, Airbus Company and each of the ultimate beneficial owner of Airbus Company are third parties independent of the Company and its connected persons (as defined in the Listing Rules). Aircraft to be acquired: Airbus Aircraft, i.e. 23 Airbus 320-series aircraft Consideration: The aircraft basic price comprises the airframe price, optional features prices and engine price. The aircraft basic price of the Airbus Aircraft in aggregate is approximately US$1,406 million (HK$10,981 million). The aircraft price is subject to price escalation by applying a formula. Airbus Company has granted to the Company significant price concessions with regard to the Airbus Aircraft. These will take the form of credit memoranda which may be used by the Company towards the purchase of the Airbus Aircraft, goods and services or may be used towards the final price payment of the Airbus Aircraft. Such credit memoranda were determined after arm's length negotiations between the parties and as aresult, the actual consideration for the Airbus Aircraft is lower than the aircraft basic price mentioned above. The Transaction was negotiated and entered into in accordance with customary business practice. The directors of the Company confirm that the extent of the price concessions granted to the Company in the Transaction is comparable with the price concessions that the Company had obtained in the previous aircraft purchase entered into between the Company and Airbus Company on 14 June 2006.The Company believes that there is no material impact of the price concessions obtained in the Transaction on the unit operating cost of the Company's fleet. It is normal business practice of the global airline industry to disclose the aircraft basic price, instead of the actual price, for aircraft acquisitions. Disclosure of the actual consideration will result in the loss of the significant price concessions and hence a significant negative impact on theCompany's cost for the Transaction and will therefore not be in the interest of the Company and the shareholders as a whole. The Company has applied to the Stock Exchange for a waiver from strict compliance of Rule 14.58(4) of the Listing Rules in respect of disclosure of the actual consideration of the Airbus Aircraft. As the relevant percentage ratio under Rule 14.07 of the Listing Rules for the Transaction is above 5% but less than 25%, the Transaction constitutes a discloseable transaction and is therefore not subject to approval by the Company's shareholders under the Listing Rules. Payment and delivery terms: The aggregate consideration for the acquisition of Airbus Aircraft is payable by cash in instalments. The Company is expecting to take delivery of the Airbus Aircraft in stages from January 2009 to December 2012. Source of funding: The Transaction will be funded through cash generated from the Company's business operations, commercial bank loans and other financing instruments of the Company. REASONS FOR AND BENEFITS OF THE TRANSACTION The Airbus Aircraft will expand the fleet capacity of the Company and will principally reinforce Chengdu's position as a regional transportation hub and increase frequency of flights, departing originally from Chengdu, of a number of key domestic flight courses. The Company expects the Airbus Aircraft will deliver more cost-efficient performance and provide more comfortable services to passengers. Although the Airbus Aircraft was purchased with other aircrafts under a package acquisition plan, which is coordinated by the NDRC, the decision to purchase the Airbus Aircraft was made independently by the Company. The negotiations under the acquisition plan were done as a package to increase bargaining power. The Directors believe that the terms of the Transaction are fair and reasonable and in the interests of the shareholders of the Company as a whole. FURTHER INFORMATION The Company shall, pursuant to the Listing Rules, dispatch a circular containing the information required under the Listing Rules in relation to the Transaction within 21 days after the publication of this announcement. DEFINITION In this announcement, unless the context otherwise requires, the following terms shall have the following meanings: "AIE" Air China Group Import and Export Trading Co., a company incorporated in the People's Republic of China and a wholly-owned subsidiary of the Company "Airbus 23 Airbus 320-series aircraft, which includes AirbusAircraft" 319, Airbus 320 and Airbus 321, to be purchased by the Company pursuant to the Airbus Aircraft Purchase Agreement "Airbus the aircraft purchase agreement dated 10 July 2007Aircraft pursuant to which the Company has agreed to purchasePurchase and Airbus Company has agreed to sell the Airbus AircraftAgreement" "Airbus Airbus S. A. S., a company incorporated in Toulouse, FranceCompany" "Company" Air China Limited, a company incorporated in the People's Republic of China with primary listing on The Stock Exchange of Hong Kong Limited and secondary listing on the Official List of the UK Listing Authority "Director(s)" the director(s) of the Company "Hong Kong The Stock Exchange of Hong Kong LimitedStock Exchange" "Listing The Rules Governing the Listing of Securities on TheRules" Stock Exchange of Hong Kong Limited "NDRC" the National Development and Reform Commission of the People's Republic of China "Transaction" the acquisition by the Company of the Airbus Aircraft pursuant to the Airbus Aircraft Purchase Agreement By order of the Board Air China Limited Huang Bin Li Man Kit Joint Company Secretaries Beijing, 10 July 2007 As at the date of this announcement, the Directors of the Company are Messrs Li Jiaxiang, Kong Dong, Wang Shixiang, Yao Weiting, Christopher Dale Pratt, Chen Nan Lok Philip, Ma Xulun, Cai Jianjiang, Fan Cheng, Hu Hung Lick, Henry*, Wu Zhipan*, Zhang Ke* and Jia Kang*. * Independent non-executive Director of the Company This information is provided by RNS The company news service from the London Stock Exchange