BOE.L Regulatory News (BOE)

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)

MAJOR TRANSACTIONPURCHASE OF AIRCRAFT

THE AIRCRAFT PURCHASE AGREEMENTS

On 22 December 2014, the Company and AIE entered into the Aircraft Purchase Agreements with Boeing Company, pursuant to which the Company has agreed to purchase the Boeing Aircraft from Boeing Company.

The details of the Transaction are summarized as follows:

Date:

22 December 2014

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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 owner are third parties independent of the Company and its connected persons (as defined under the Listing Rules).

Aircraft to be Acquired

The Boeing Aircraft, being 60 Boeing model 737 aircraft

Consideration

The aircraft basic price comprises the airframe price, optional features price and engine price.

The aircraft basic price of the Boeing Aircraft to be acquired by the Company in aggregate is approximately US$5,888 million (equivalent to approximately HK$45,661 million) (price quoted from open market as at July 2012). The aircraft price is subject to price escalation by applying a formula. Boeing Company has granted to the Company significant price concessions with regard to the 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 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 Boeing 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 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 agreement entered into between the Company and Boeing Company as set out in the announcement of the Company dated 1 March 2013. The Company believes that there is no material impact of the price concessions obtained in the Transaction 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 Transaction and will therefore not be in the interest of the Company and the Shareholders

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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 Boeing Aircraft.

Payment and Delivery Terms:

The aggregate consideration for the Transaction is payable by the Company by cash in instalments. The Company is expecting to take delivery of the Boeing Aircraft in stages from 2016 to 2020.

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. The Transaction is expected to have no material impact on the cash flow and operation of the Company.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The Transaction 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 Transaction will strengthen the fleet capacity of the Group with an increase of approximately 8%, based on the number of available tonne kilometers of the Group as at 31 December 2013. The Company expects the Boeing Aircraft will deliver more cost efficient performance and provide more comfortable services to its passengers.

The Directors believe that the terms of the Transaction are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio under Rule 14.07 of the Listing Rules for the Transaction is above 25% but less than 100%, the Transaction constitutes a major transaction of the Company and is subject to the reporting, announcement and Shareholders' approval requirement under Chapter 14 of the Listing Rules.

CNAHC currently directly and indirectly (through CNACG, a wholly-owned subsidiary of CNAHC) holds approximately 53.37% of the total issued share capital of the Company. Each of CNAHC and CNACG and their respective associates (as defined under the Listing Rules) does not have any interest in the Transaction other than being a shareholder of the Company (where applicable). Since none of the shareholder of the Company is required to abstain from voting if the Company were to convene a general meeting to approve the Transaction, the Company intends and expects to obtain the written approval of CNAHC and CNACG for the purpose of approving the Transaction in lieu of holding a general meeting to approve the Transaction pursuant to Rule 14.44 of the Listing Rules. A circular containing further information in relation to the Transaction is expected to be despatched to the Shareholders on or before 15 January 2015 in accordance with the Listing Rules.

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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

"Aircraft Purchase Agreements": the two aircraft purchase agreements dated 22 December 2014 and entered into by the Company, AIE and Boeing Company, pursuant to which the Company has agreed to purchase the Boeing Aircraft from Boeing Company

"Boeing Aircraft": 60 Boeing model 737 aircraft to be purchased by the Company pursuant to the Aircraft Purchase Agreements

"Boeing Company": The Boeing Company, a company incorporated under the Laws of Delaware of the United States

"Board": the board of directors of the Company

"CNACG": China National Aviation Corporation (Group) Limited, a company incorporated under the laws of Hong Kong, which is a wholly- owned subsidiary of CNAHC and a substantial shareholder of the Company

"CNAHC": China National Aviation Holding Company, a company with limited liability incorporated under the laws of the PRC, which was a substantial shareholder of the Company

"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

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"Listing Rules": the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

"PRC": the People's Republic of China, excluding, for the purpose of this announcement only, Hong Kong, Macau and Taiwan

"Shareholders": the shareholders of the Company

"Stock Exchange": The Stock Exchange of Hong Kong Limited

"Transaction": the purchase by the Company of the Boeing Aircraft pursuant to the Aircraft Purchase Agreements

Beijing, the PRC, 22 December 2014

As at the date of this announcement, 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. Fu Yang*, Mr. Yang Yuzhong*, Mr. Pan Xiaojiang* and Mr. Simon To Chi Keung*.

*Independent non-executive Director of the Company

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