Last checked at 8 Jan 2016 07:00
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AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code:00753)
DISCLOSEABLE TRANSACTION PURCHASE OF AIRCRAFT
On 7 January 2016, the Company and AIE entered into the Boeing Aircraft Purchase Agreement with Boeing Company to purchase the New Boeing Aircraft.
The highest applicable percentage ratio under Rule 14.07 of the Listing Rules for the Boeing Aircraft Purchase, on a standalone basis, is above 5% but less than 25%. The highest applicable percentage ratio under Rule 14.07 of the Listing Rules for the Boeing Aircraft Purchase, when aggregated with the Previous Boeing Transaction, is above 25% but less than 100%. As the Company had complied with the major transaction requirements for the Previous Boeing Transaction, it would not reclassify the Boeing Aircraft Purchase by aggregating it with the Previous Boeing Transaction. Therefore, the Boeing Aircraft Purchase constitutes a discloseable transaction of the Company under the Listing Rules. |
BOEING AIRCRAFT PURCHASE AGREEMENT
Date:
7 January 2016 (after trading hours)
Parties:
(a) the Company, as the purchaser, the principal business activity of which is air passenger, air cargo and airline-related services;
(b) AIE, as the import agent for the Company; and
(c) Boeing Company, as the vendor, one of whose principal business activities is aircraft manufacturing.
To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, Boeing Company and each of its ultimate beneficial owners are third parties independent of the Company and its connected persons (as defined under the Listing Rules).
Aircraft to be acquired:
The New Boeing Aircraft, being 6 Boeing model B777-300ER aircraft.
Consideration:
The aircraft basic price comprises the airframe price, optional features price and engine price. The aircraft basic price of the New Boeing Aircraft to be acquired by the Company in aggregate is
approximately US$2,051 million (equivalent to approximately HK$15,895 million) (price quoted from open market as at July 2014). The aircraft price is subject to price escalation by applying a formula. Boeing Company has granted to Air China significant price concessions with regard to the New Boeing Aircraft. These concessions will take the form of credit memoranda which may be used by the Company towards the final price payment of the New Boeing Aircraft or may be used for the purpose of purchasing goods and services from Boeing Company. Such credit memoranda were determined after arm's length negotiations between the parties and as a result, the actual consideration for the New Boeing Aircraft is lower than the aircraft basic price mentioned above.
The Boeing Aircraft Purchase was negotiated and entered into in accordance with customary business practice. The Directors confirm that the extent of the price concessions granted to the Company in the Boeing Aircraft Purchase is comparable with the price concessions that the Company had obtained in the Previous Boeing Transaction as set out in the announcement of the Company dated 3 June 2015. The Company believes that there is no material impact of the price concessions obtained in the Boeing Aircraft Purchase on the unit operating cost of the Group'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 the Group's cost for the Boeing Aircraft Purchase 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 New Boeing Aircraft.
Payment and delivery terms:
The aggregate consideration for the Boeing Aircraft Purchase is payable by cash in instalments. The Company is expecting to take delivery of the New Boeing Aircraft in stages from 2016 to 2017.
Source of funding:
The Boeing Aircraft Purchase will be funded through cash generated from the Company's business operations, commercial bank loans and other financing instruments of the Company. The Boeing Aircraft Purchase is expected to have no material impact on the cash flow and operation of the Group.
REASONS FOR AND BENEFITS OF THE BOEING AIRCRAFT PURCHASE
The Boeing Aircraft Purchase will expand the overall fleet capacity of the Group and optimize its fleet structure. If not taking into account the adjustments that may be made to the fleet (including the disposal of used aircraft) based on marketing condition and aging of the fleet, the Boeing Aircraft Purchase will strengthen the fleet capacity of the Group with an increase of approximately 5% based on the number of available tonne kilometers of the Group as at 31 December 2014. The Company expects the New Boeing Aircraft will deliver more cost efficient performance and provide more comfortable services to its passengers.
The Directors believe that the terms of the Boeing Aircraft Purchase are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
LISTING RULES IMPLICATIONS
The highest applicable percentage ratio under Rule 14.07 of the Listing Rules for the Boeing Aircraft Purchase, on a standalone basis, is above 5% but less than 25%. The highest applicable percentage ratio under Rule 14.07 of the Listing Rules for the Boeing Aircraft Purchase, when aggregated with the Previous Boeing Transaction, is above 25% but less than 100%. As the Company had complied with the major transaction requirements for the Previous Boeing Transaction, it would not reclassify the Boeing Aircraft Purchase by aggregating it with the Previous Boeing Transaction. Therefore, the Boeing Aircraft Purchase constitutes a discloseable transaction of the Company under the Listing Rules.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions shall have the following respective meanings:
"AIE" | Air China Import and Export Co., Ltd. (國航進出口有限公司), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Company |
"Board" | the board of directors of the Company |
"Boeing Aircraft Purchase" | the purchase by the Company of the New Boeing Aircraft pursuant to the Boeing Aircraft Purchase Agreement |
"Boeing Aircraft Purchase Agreement"
| the aircraft purchase agreement dated 7 January 2016 and entered into by the Company, AIE and Boeing Company, pursuant to which the Company has agreed to purchase the New Boeing Aircraft from Boeing Company |
"Boeing Company" | The Boeing Company, a company incorporated under the Laws of Delaware of the United States |
"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 |
"Director(s)" | the director(s) of the Company |
"Group" | the Company and its subsidiaries |
"HK$" | Hong Kong dollars, the lawful currency of Hong Kong |
"Hong Kong" | Hong Kong Special Administrative Region of the PRC |
"Listing Rules" | the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
"New Boeing Aircraft" | 6 Boeing model B777-300ER aircraft to be purchased by the Company pursuant to the Boeing Aircraft Purchase Agreement |
"PRC" | the People's Republic of China, excluding, for the purpose of this announcement only, Hong Kong, Macau and Taiwan |
"Previous Boeing Transaction"
| the purchase of 46 Boeing model 737 aircraft pursuant to the aircraft purchase agreement entered into by Shenzhen Airlines Company Limited and Boeing Company on 3 June 2015 |
"Shareholders" | the shareholders of the Company |
"Stock Exchange" | The Stock Exchange of Hong Kong Limited |
"US$" | United States dollars, the lawful currency of the United States |
By order of the Board
Air China Limited Rao Xinyu Tam Shuit Mui
Joint Company Secretaries
Beijing, the PRC, 7 January 2016
As at the date of this notice, the directors of the Company are Mr. Cai Jianjiang, Ms. Wang Yinxiang, Mr. Cao Jianxiong, Mr. Feng Gang, Mr. John Robert Slosar, Mr. Ian Sai Cheung Shiu, Mr. Song Zhiyong, Mr. Fan Cheng, Mr. Pan Xiaojiang*, Mr. Simon To Chi Keung*, Mr. Stanley Hui Honchung* and Mr. Li Dajin*.
* Independent non-executive Director of the Company