Air China Regulatory News (AIRC)

15 Jun 2006 07:09

Air China Ld15 June 2006 The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or 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. (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 753) MAJOR TRANSACTION: PURCHASE OF 24 AIRBUS 320-series AIRCRAFT The Company hereby announces that on 14 June 2006, the Company andAIE entered into the Airbus Aircraft Purchase Agreement with Airbus Company, pursuant to which the Company has agreed to purchase 24 Airbus 320-series aircraft from Airbus Company. CNAHC, which currently directly owns approximately 51.16% of the total issued share capital of the Company, has approved the Transaction. CNAHC does not have any interest in the Transaction other than as a shareholder of the Company. The Transaction constitutes a major 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 14 June 2006 the Company and AIE entered into the Airbus Aircraft Purchase Agreement with Airbus Company, pursuant to whichthe Company has agreed to purchase 24 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 5 November 2005 (the 2005 Framework Agreement). The details of the Transaction are summarized as follows: Date of the Transaction: 14 June 2006 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 independent third parties and not connected persons (as defined in the Listing Rules) of the Company. Aircraft to be acquired: Airbus Aircraft, i.e. 24 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 USD1,744.08 million (HKD13,563.19 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 andservices or may be used towards the final price payment of the Airbus Aircraft. Such credit memoranda were determined after arm'slength negotiations between the parties and as a result, 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 withcustomary business practice. Taking into account all the factors relating to the purchase of aircraft by the Company, including themarket condition, the type, number and delivery schedule of aircraft being purchased, and the terms of the 2005 Framework Agreement, 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 aircraftpurchase entered into between the Company and Airbus Company on 26January 2005 (the 2005 Aircraft Purchase). The Company believes that there is no material difference between the effect of the price concessions obtained in the Transaction and the 2005 Aircraft Purchase on the Company's operating costs taken 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 25% but less than 100%, the Transaction constitutes a major transaction and is therefore subject to approval by the Company's shareholders under the Listing Rules. Payment and delivery terms: The aggregate consideration for the acquisition of Airbus Aircraftis payable by cash in instalments. The Company is expecting to take delivery of the Airbus Aircraft in stages from 2007 to 2010. 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 Beijing's position as a transportation hub and increase frequency of flights, departing originally from Beijing, of a number of key domestic flight courses. The Company expects the Airbus Aircraft will deliver morecost-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 CNAHC currently directly owns approximately 51.16% of the total issued share capital of the Company. Each of CNAHC and its associates (as defined in the Listing Rules) does not have any interest in the Transaction other than as a shareholder of the Company (where applicable). No shareholder of the Company is required to abstain from voting if the Company was to convene a general meeting for the approval of the Transaction. CNAHC has approved the Transaction by way of a written approval pursuant to Rule 14.44 of 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. 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 Aircraft" 24 Airbus 320-series aircraft, which includes Airbus 319, Airbus 320 and Airbus 321, to be purchased by the Company pursuant to the Airbus Aircraft Purchase Agreement "Airbus Aircraft the aircraft purchase agreement dated 14 June 2006Purchase pursuant to which the Company has agreed to Agreement" purchase and Airbus Company has agreed to sell the Airbus Aircraft "Airbus Company" Airbus S.A.S., a company incorporated in Toulouse, France "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 "CNAHC" China National Aviation Holding Company, a company incorporated in the People's Republic of China "Director(s)" the director(s) of the Company "Hong Kong Stock The Stock Exchange of Hong Kong Limited Exchange" "Listing Rules" The Rules Governing the Listing of Securities on The 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 Zheng Baoan Li Man Kit Joint Company Secretaries Beijing, 14 June 2006 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, Ma Xulun, Cai Jianjiang, Fan Cheng, Hu Hung Lick, Henry*, Wu Zhipan* and Zhang Ke*. * Independent non-executive Director of the Company This information is provided by RNS The company news service from the London Stock Exchange