REG - Air China Ld - CONTINUING CONNECTED TRANSACTION
29/05/2025 07:00
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RNS Number : 5763K Air China Ld 29 May 2025
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.
中國國際航空股份有限公司
AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 00753)
CONTINUING CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION
CONTINUING CONNECTED TRANSACTION
Reference is made to the 2022 Circular in relation to, among other things, the
CNACG Transactions. The current term of the CNACG Framework Agreement will
expire on 31 December 2025. As the Company expects that the CNACG Transactions
will continue to be conducted after
31 December 2025, on 28 May 2025, the Board resolved to renew the CNACG
Framework Agreement for a term of three years commencing from 1 January 2026
to 31 December 2028, subject to Independent Shareholders' approval at the AGM.
HONG KONG LISTING RULES IMPLICATIONS
CNACG is a connected person of the Company as defined under the Hong Kong
Listing Rules, and accordingly the CNACG Transactions constitute continuing
connected transactions of the Company under Chapter 14A of the Hong Kong
Listing Rules. As the highest applicable percentage ratio of the proposed
annual cap in respect of the total value of right-of-use assets relating to
the finance and operating leases entered into by the Group as lessee under the
CNACG Transactions is, on an annual basis, higher than 5% but less than 25%,
these transactions are therefore subject to the announcement, annual review,
circular (including advice of independent financial adviser) and Independent
Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing
Rules and the requirements under Chapter 14 of the Hong Kong Listing Rules
applicable to discloseable transactions.
In respect of the operating lease not accounted for as right-of-use assets
provided by the CNACG Group, as the highest applicable percentage ratio in
respect of the proposed annual caps of the rental fee payable by the Group is,
on an annual basis, higher than 0.1% but less than 5%, these
transactions are subject to the announcement and annual review requirements
under Chapter 14A of the Hong Kong Listing Rules but are exempt from the
Independent Shareholders' approval requirement.
In respect of the ground support services and other services provided by CNACG
Group, as the highest applicable percentage ratio in respect of the proposed
annual caps of the amounts payable by the Group is, on an annual basis, higher
than 0.1% but less than 5%, these transactions are subject to the announcement
and annual review requirements under Chapter 14A of the Hong Kong Listing
Rules but are exempt from the Independent Shareholders' approval requirement.
In respect of the finance and operating lease services provided by the Group
to CNACG Group, for each of the three years ending 31 December 2026, 2027 and
2028, the aggregate amounts payable to the Group is expected to fall below the
de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong
Listing Rules. Therefore, such transactions will be exempt from the
announcement, annual review and Independent Shareholders' approval
requirements under Chapter 14A of the Hong Kong Listing Rules.
In respect of the ground support services and other services provided by the
Group to CNACG Group, for each of the three years ending 31 December 2026,
2027 and 2028, the aggregate amounts payable to the Group is expected to fall
below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the
Hong Kong Listing Rules. Therefore, such transactions will be exempt from the
announcement, annual review and Independent Shareholders' approval
requirements under Chapter 14A of the Hong Kong Listing Rules.
Pursuant to the Shanghai Listing Rules, the CNACG Transactions shall be
approved by the Independent Shareholders at the AGM.
The Company will convene the AGM, among other things, for the consideration
and approval of Independent Shareholders on the CNACG Framework Agreement, the
CNACG Transactions and the proposed annual caps for the CNACG Transactions. A
circular containing, among others, (i) details regarding the CNACG
Transactions; (ii) a letter from the Independent Financial Adviser to the
Independent Board Committee and the Independent Shareholders regarding its
advice on the Non-exempt Transactions; and (iii) the recommendation from the
Independent Board Committee regarding the Non-exempt Transactions, will be
published by the Company on or before 4 June 2025 in accordance with the Hong
Kong Listing Rules.
I. CNACG TRANSACTIONS
Reference is made to the 2022 Circular in relation to, among other things, the
CNACG Transactions. The current term of the CNACG Framework Agreement will
expire on 31 December 2025. As the Company expects that the CNACG Transactions
will continue to be conducted after 31 December 2025, on 28 May 2025, the
Board resolved to renew the CNACG Framework Agreement for a term of three
years commencing from 1 January 2026 to 31 December 2028, subject to
Independent Shareholders' approval at the AGM.
1. Parties and the relationship between the parties
The Company's principal business activity is air passenger, air cargo and
airline-related services.
CNACG is a wholly-owned subsidiary of CNAHC, the controlling shareholder of
the Company, and a substantial shareholder of the Company, directly holding
approximately 11.18% of the Company's shares as at the date of this
announcement. CNACG is an investment holding company established in Hong Kong
whose principal businesses include passenger terminal operation, cargo
terminal operation, airport ground handling services, airline catering
services, finance/operating lease, aircraft maintenance, property investment,
logistics and other businesses conducted through its subsidiaries. As at the
date of this announcement, the State-owned Assets Supervision and
Administration Commission of the State Council is the 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.
2. Description of the CNACG Transactions
The CNACG Transactions contemplated under the CNACG Framework Agreement are as
follows:
• Finance and operating lease services: the CNACG Group will
provide finance and operating lease services in respect of, including but not
limited to, aircraft, engines, simulators, aircraft-related materials,
equipment and vehicles to the Group; the Group will provide finance and
operating lease services in respect of, including but not limited to,
equipment and vehicles to the CNACG Group.
Set out below are the differences between (i) engines, equipment and vehicle
leasing services provided by the CNACG Group to the Group; and (ii) equipment
and vehicle leasing services provided by the Group to the CNACG Group:
o The CNACG Group leases engines, equipment and vehicles to the
Group through its specialised leasing subsidiary. These leasing services,
offered under either finance lease or operating lease arrangements, typically
have leasing terms of one year or longer. The leased equipment primarily
includes airborne media equipment, baggage handling equipment and vehicles;
o The Group provides equipment and vehicle leasing services to
the CNACG Group on a selective basis, primarily consisting of catering
trolleys leases based on the needs of CNACG Group from time to time and
typically involving a leasing term of one year or longer.
• Ground support services and other services: including but not
limited to the following transactions conducted between any member of the
Group on the one hand and any member of the CNACG Group on the other hand:
ground support services, aircraft maintenance services, aircraft repair
services, property investment and management services, ticket and tourism
services, logistics services, administrative management services, cleaning and
washing services, resident security services, lounge supplies procurement
services and aircraft material procurement services.
In particular, the services provided by the CNACG Group to the Group from time
to time mainly include the ground support services, aircraft maintenance
services, property investment and management services, ticket and tourism
services, logistics services, administrative management services, cleaning and
washing services and resident security services, while the services provided
by the Group to the CNACG Group from time to time mainly include the aircraft
repair services, lounge supplies procurement services and aircraft material
procurement services.
3. Pricing policies for the CNACG Transactions
The consideration of any specific CNACG Transactions shall be agreed on arm's
length negotiations between the Group and the CNACG Group and on normal
commercial terms, which shall be determined in accordance with the pricing
policies set forth below on a case-by-case basis.
• Finance and operating lease services: the final transaction price
will be determined on arm's length negotiations between both parties with
reference to the prices for the same type of lease services offered by
independent third parties and after taking into account certain factors. Such
factors include purchasing price of the leasing subject, interest rate and
arrangement fees (if any) (for finance lease), rental fee (for operating
lease), the lease terms, the feature of the leasing subject and the comparable
market rental prices. The final transaction price should not be higher than
the transaction prices offered by at least two independent third parties on
the same conditions (for services received by the Group); or the final
transaction price should not be lower than the transaction prices offered by
the Group to the independent third parties on the same conditions (for
services provided by the Group
· Ground support services and other services:
The pricing policies for ground support services and other services provided
to or by the Group are set forth below:
(i) Follow the government pricing or guide price if it is available,
including but not limited to the guidance from the Civil Aviation
Administration of China (CAAC) and the International Air Transport Association
regarding the prices for the ground support services and other terms, as well
as the pricing standards for aeronautical information set by CAAC and the Air
Traffic Management Bureau.
(ii) If no government pricing or guide price is available, first by
making reference to the market prices offered by at least two independent
third parties on the market for the same type of services, and after
considering certain factors, the final transaction price shall be determined
through arm's length negotiations between the parties. Such factors include
service standards, scope, business volume and specific need of parties. If the
service recipient's service requirements change, the transaction price may be
adjusted appropriately through negotiation between both parties, based on the
extent of changes in relevant costs, service quality or other factors.
(iii) If neither of the above cases is applicable, the price will be
determined on the basis of cost plus reasonable profit. The costs are mainly
based on the costs and expenses of the service provider, including human
resource costs, facility, equipment and material costs. The reasonable profit
margin will be determined mainly by reference to the historical average prices
of similar products or services (where possible) of the relevant industry,
and/or the profit margin of comparable products and services disclosed by
other listed companies. The profit margin of the CNACG Group shall not exceed
10%. The final transaction prices shall be determined on terms that are no
less favourable to the Group than those provided by independent third parties
to the Group or by the CNACG Group to independent third parties (for services
received by the Group), or no more favourable than those provided by the Group
to independent third parties (for services provided by the Group). The Group
may generally learn about the historical average prices of reasonable profit
margins for similar products or services in the relevant industry by making
its own enquiries at the official websites of other listed companies. Besides,
prior to entering into individual CNACG Transactions, the Group may have
access to the terms of similar comparable transactions entered into by the
CNACG Group with independent third parties for reference in determining the
transaction price. While making reference to the profit
margins of comparable products and services disclosed by other listed
companies, the Group will seek to obtain as much comparable data as
practicable, typically referencing at least two listed companies' relevant
data where practicable.
4. The term of the CNACG Framework Agreement
The renewal of the CNACG Framework Agreement is subject to the approval of
Independent Shareholders at the AGM. If approval of the Independent
Shareholders is obtained, the CNACG Framework Agreement will be renewed for a
term of three years commencing from 1 January 2026 to 31 December 2028, and
may be renewed automatically for successive terms of three years each, subject
to the fulfilment of requirements under the Hong Kong Listing Rules/the
Shanghai Listing Rules and the approval procedures required under the Hong
Kong Listing Rules/the Shanghai Listing Rules. Before expiry of the term of
the CNACG Framework Agreement, the Board will re- assess the terms and
conditions of the CNACG Framework Agreement, and the Company will re-comply
with the relevant rules governing connected transactions under the Hong Kong
Listing Rules/the Shanghai Listing Rules. During the term of the CNACG
Framework Agreement, the agreement can be terminated upon the expiry on any 31
December by either party thereto by serving the other party a prior written
notice of not less than three months.
5. Reasons for and benefits of the CNACG Transactions
Regarding the finance and operating lease services, by utilizing the leasing
platform of the CNACG Group, the Group is able to secure equipment tailored to
its specific needs, benefiting from lower financing costs, greater flexibility
and reduced cash flow impact compared to direct purchases. This effectively
supports the Group's production and operational needs. Simultaneously, the
CNACG Group gains a stable revenue stream, creating a mutually beneficial and
win-win relationship for both parties.
Regarding the ground support services and other services, the CNACG Group
possesses extensive management experience and financial resources in airport
ground services and logistics operations, which enables the CNACG Group to
provide high-quality, efficient and convenient services to the Group,
primarily covering ground operations in Hong Kong, as well as administrative
support. The Group provides ground and other services to the CNACG Group,
mainly focused on aviation materials procurement, albeit on a smaller scale.
The collaboration between the CNACG Group and the Group ensures a mutually
beneficial partnership, enhancing service quality and operational efficiency
for both parties.
Overall, the transaction fosters a win-win relationship, with both parties
leveraging their respective strengths to achieve cost efficiency, operational
stability and mutual growth.
6. Historical amounts and existing annual caps
The table below sets out (i) the annual caps of the Group for the three years
ended/ending 31 December 2023, 2024 and 2025; and (ii) the actual historical
amounts for each of the two years ended 31 December 2023 and 2024 and the
estimated aggregate amounts payable for the year ending 31 December 2025:
Unit: RMB million
Estimated Amounts
Actual Historical Amounts Existing Annual Caps
For the year ended 31 December For the year ended 31 December For the year ending 31 December For the year ended 31 December For the year ended 31 December For the year ending 31 December
2023 2024 2025 2023 2024 2025
Total value of right-of-use assets in relation to the finance and operating
leases entered into by
the Group as lessee
808 1,948 7,466 14,000 16,500 17,500
Annual rental fee for operating leases not accounted for as right-of-use
assets provided by CNACG Group
18 18 23 100 140 220
Amounts payable/paid to CNACG
Group by the Group for ground support services and other services
423 440 405 750 800 850
Reasons for the lower utilization rate of the historical annual caps
For the years ended 31 December 2023 and 2024, the utilization rates were
calculated by comparing the actual historical amounts against the respective
existing annual caps during each period. Looking ahead to 2025, the estimated
utilization rates are based on the estimated amounts for the year ending 31
December 2025 against the existing annual cap for 2025. Specifically, the
utilization rates for total value of right-of-use assets in relation to
finance and operating leases entered into by the Group as lessee were 6% in
2023 and 12% in 2024, with an estimated utilization rate of 43% for 2025. For
the annual rental fee for operating leases not accounted for as right-of-use
assets provided by the CNACG Group, the utilization rates were 18% in 2023 and
13% in 2024, with an estimated 10% utilization rate for 2025. Amounts
payable/paid to the CNACG Group by the Group for ground support services and
other services showed utilization rates of 56% in 2023 and 55% in 2024, with
the 2025 estimation at 48% of the existing annual cap. The estimated amounts
for the year ending 31 December 2025 is based on the Group's plan to introduce
47 aircraft during 2025, of which no more than 50% will be financed through
finance lease arrangements with the CNACG Group.
The discrepancy between the actual and estimated expenditure on finance leases
is mainly due to delivery uncertainties by aircraft manufacturers, resulting
in delays and a lower- than-planned number of aircraft introduced through
finance leases. Additionally, the proceeds raised from the Company's
non-public issuance of shares in 2022 and 2024 were primarily used for direct
aircraft purchases, which further reduced the number of aircraft introduced
via finance leases. The relatively low utilization rate of the historical
annual caps for ground support services and other services is primarily due to
flight volumes in Hong Kong not yet recovering to pre-pandemic levels,
resulting in lower-than-expected utilization rate of the transaction annual
caps for ground support services and other related services.
7. Proposed annual caps and basis of determination
The table below sets out the proposed annual caps for the relevant
transactions of the Group below for each of the three years ending 31 December
2026, 2027 and 2028, respectively:
Unit: RMB million
Proposed Annual Caps
For the year For the year For the year
ending 31 December ending 31 December ending 31 December
2026 2027 2028
Total value of right-of-use assets in relation to the finance and operating
leases entered into
by the Group as lessee
14,800 19,500 17,500
Annual rental fee for operating leases not accounted for as right-of-use
assets provided
by CNACG Group
200 300 400
Amounts payable to CNACG Group by the Group for ground support services and
other services
750 800 850
In arriving at the annual caps of the total value of right-of-use assets in
relation to the finance and operating leases entered into by the Group as
lessee above, the Company has considered the following factors:
• When estimating the total value of right-of-use assets in
relation to aircraft under finance lease for the next three years, the Company
has considered: (i) historical transaction amounts; (ii) the aircraft
introduction plan of the Group and the assumption that 50% of aircraft to be
introduced during 2026 to 2028 for which funding arrangements have not been
finalised will be introduced through finance lease with the CNACG Group. The
proposed annual cap for 2028 is lower than it for 2027 primarily because the
proposed annual caps in respect of finance lease are derived based on the
aircraft introduction plan of the Group. The aircraft introduction plan is
driven by operational and strategic considerations which are formulated
through comprehensive analysis of multiple operational factors including fleet
composition optimisation, strategic market deployment and planned capacity
allocation. It is estimated that more aircraft will be introduced in 2027 than
in 2028, leading to a lower proposed annual cap for 2028 compared to it for
2027; (iii) given the expected lease term of 10 to 12 years for each aircraft
under finance lease, the calculation of aircraft finance lease interest uses
the People's Bank of China's over- five-year RMB Loan Prime Rate (LPR) of 3.6%
as of 30 April 2025; (iv) based on the information currently available to the
Group, it is anticipated that the CNACG Group will not charge arrangement fees
for finance leases in the coming three years, and accordingly the arrangement
fees have not been included in the annual cap estimates.
• When estimating the total value of right-of-use assets under
operating leases for aircraft, engines and ground equipment over the next
three years, the Company has considered: (i) in respect of aircraft operating
leases, the estimation is primarily based on the Group's aircraft induction
and retirement plans, and assuming no more than 10 aircraft will be introduced
through operating leases with the CNACG Group for each of the years from 2026
to 2028. The lease rentals will be determined mainly by reference to
prevailing market rates or professional appraisals subject to arm's length
negotiations between the parties; (ii) in respect of the operating leases of
engines and ground equipment, the estimation takes into account the current
lease arrangements, the operational status of the Group's engines, simulators
and equipment, along with anticipated commercial demand for operating lease in
the next three years. Specifically, the Group plans to lease annually from the
CNACG Group (a) one to two used engines and (b) 23 ground equipment units,
with lease terms typically ranging from 1 to 12 years.
• An exchange rate of RMB7.3 : USD1.0 is adopted for the
calculation of the proposed annual caps.
• A reasonable buffer of 5% is reserved to accommodate
unforeseen circumstances, ensuring flexibility in the financial planning
process.
• Based on the above, the Company expected that for the three years
ending 31 December 2028, the total annual rental fee payable by the Group to
CNACG Group throughout the lease term for aircraft, engines and ground
equipment under finance lease and operating lease entered into will not exceed
RMB15 billion, RMB20 billion and RMB18 billion, respectively. By adopting the
incremental borrowing rate of the Company as the discount rate (ranging from
2.24% to 2.74%) to discount such estimated future total rental fee, the total
value of the right-of-use assets under the finance leases and operating
leases entered into by the Group as the lessee for the three years ending 31
December 2028 will not exceed RMB14.8 billion, RMB19.5 billion and RMB17
billion, respectively.
In arriving at the above annual caps of annual rental fee payable by the Group
to the CNACG Group in relation to the operating leases not accounted for as
right-of-use assets, the Company has considered, among other things, the
following factors:
• The historical transaction amounts and the assumption that
certain operating leases of ground equipment may have a lease term of less
than one year.
• The operation status of the Group's engines and equipment
and the Group's commercial demand for operating leases in the following three
years. The Group's annual rental fees paid for the lease with the CNACG Group
that were not accounted for as right-of-use assets in the past were mainly
related to some sporadic and temporary leases of engines and equipment, with
an annual rental fee of approximately RMB25 million. As mentioned above, the
Group may lease between one to two engines and 23 pieces of ground equipment
from the CNACG Group in each of the three years from 2026 to 2028,
respectively. As the Group has not yet determined whether to adopt long-term
leases of over one year (in which case the leased assets will be accounted for
as right-of-use assets) or short-term leases for these engines and equipment,
the Company has also set annual caps for the rental fees of operating leases
not accounted for as right-of-use assets to ensure that the transaction
amounts are subject to corresponding annual caps regardless of the lease
method. The Group will determine the lease method based on its actual business
needs, taking into account the respective rental quotations for long-term and
short-term leases and the financial impact on the Group. Based on the above,
the Company estimates that, for the three years ending 31 December 2028, the
annual rental fee of operating leases for engines and equipment not accounted
for as right- of-use assets will not exceed RMB101 million, RMB180 million and
RMB259 million, respectively.
• On the basis of the above estimated transaction amount and
accounting for potential foreign exchange fluctuations, a reasonable buffer of
5% has further been included by rounding to the nearest integer to accommodate
the Group's operating needs from time to time.
In arriving at the above annual caps of amount payable by the Group to the
CNACG Group for ground support services and other services provided by the
CNACG Group, the Company has considered, among other things, the following
factors:
• Since 2023, the ground support and other services transaction
volume has experienced growth, with the actual transaction amount reaching
RMB440 million in 2024. Such growth reflects the Group's increasing demand for
the CNACG Group's ground support and other services.
• Looking ahead, the estimated transaction scale for 2026 to 2028 is
estimated to range between RMB500 million and RMB800 million. Such estimation
is assuming an average annual growth rate of 7%, which is reached with
reference to the civil aviation industry's average annual growth rate outlined
in the "14th Five-Year Plan". Additionally, factors such as rising labor costs
have been taken into account to ensure a realistic and comprehensive forecast.
• To account for potential uncertainties or unforeseen
circumstances, a reasonable buffer of 5% has been included in the proposed
annual caps for the amount payable by the Group to the CNACG Group for ground
support services and other services provided by the CNACG Group, which ensures
flexibility and preparedness for any unexpected changes in service demand or
operational requirements.
8. Internal control procedures
The Group has adopted the following internal control procedures to ensure that
the CNACG Transactions will be conducted on normal commercial terms, and in
accordance with the CNACG Framework Agreement and the pricing policies of the
Group:
• Before entering into individual CNACG Transactions, the Finance
Department, the Legal Department, the Asset Management Department (which has a
dedicated subdivision responsible for the management of connected
transactions) and if applicable, certain other relevant departments of the
Company will review the proposed terms for the individual CNACG Transactions
and discuss with the relevant business department of the Group to ensure that
such transactions are conducted on normal commercial terms 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
overseeing the connected transactions of the Company. The Asset Management
Department will monitor and collect detailed information on the CNACG
Transactions on a regular basis, including but not limited to the
implementation of pricing policies, term of agreement and actual transaction
amount of each finance lease transaction, operating lease transaction and
ground support services and other services to ensure that the transactions
are conducted in accordance with the framework agreement. In addition, the
Asset Management Department is responsible for monitoring and reviewing the
balance amount of the annual cap for the CNACG Transactions on a monthly basis
and if the annual cap for the CNACG Transactions is expected to be exceeded
for a particular year, it will report to the management and take appropriate
measures in accordance with the relevant requirements of the Hong Kong Listing
Rules and/or the Shanghai Listing Rules.
• The Company's Internal Audit Department is responsible for
performing annual assessment on the internal control procedures of the Group,
including but not limited to the relevant information on the management of
continuing connected transactions. In addition, the Internal Audit Department
is responsible for compiling the annual internal control assessment report and
submitting the report to the Board for examination and approval.
• The independent auditor of the Company and the independent
non-executive Directors will conduct an annual review on the continuing
connected transactions of the Group.
II. HONG KONG LISTING RULES IMPLICATIONS
CNACG is a connected person of the Company as defined under the Hong Kong
Listing Rules, and accordingly the CNACG Transactions constitute continuing
connected transactions of the Company under Chapter 14A of the Hong Kong
Listing Rules. As the highest applicable percentage ratio of the proposed
annual cap in respect of the total value of right-of-use assets relating to
the finance and operating leases entered into by the Group as lessee under the
CNACG Transactions is, on an annual basis, higher than 5% but less than 25%,
these transactions are therefore subject to the announcement, annual review,
circular (including advice of independent financial adviser) and Independent
Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing
Rules and the requirements under Chapter 14 of the Hong Kong Listing Rules
applicable to discloseable transactions.
In respect of the operating lease not accounted for as right-of-use assets
provided by the CNACG Group, as the highest applicable percentage ratio in
respect of the proposed annual caps of the rental fee payable by the Group is,
on an annual basis, higher than 0.1% but less than 5%, these transactions are
subject to the announcement and annual review requirements under Chapter 14A
of the Hong Kong Listing Rules but are exempt from the Independent
Shareholders' approval requirement.
In respect of the ground support services and other services provided by CNACG
Group, as the highest applicable percentage ratio in respect of the proposed
annual caps of the amounts payable by the Group is, on an annual basis, higher
than 0.1% but less than 5%, these transactions are subject to the
announcement and annual review requirements under Chapter 14A of the Hong Kong
Listing Rules but are exempt from the Independent Shareholders' approval
requirement.
In respect of the finance and operating lease services provided by the Group
to CNACG Group, for each of the three years ending 31 December 2026, 2027 and
2028, the aggregate amounts payable to the Group is expected to fall below the
de minimis threshold as stipulated under Rule 14A.76(1)(a) of the Hong Kong
Listing Rules. Therefore, such transactions will be exempt from the
announcement, annual review and Independent Shareholders' approval
requirements under Chapter 14A of the Hong Kong Listing Rules.
In respect of the ground support services and other services provided by the
Group to CNACG Group, for each of the three years ending 31 December 2026,
2027 and 2028, the aggregate amounts payable to the Group is expected to fall
below the de minimis threshold as stipulated under Rule 14A.76(1)(a) of the
Hong Kong Listing Rules. Therefore, such transactions will be exempt from the
announcement, annual review and Independent Shareholders' approval
requirements under Chapter 14A of the Hong Kong Listing Rules.
Mr. Ma Chongxian, Mr. Wang Mingyuan, Mr. Cui Xiaofeng and Mr. Xiao Peng, being
the Directors of the Company also holding directorship in CNAHC, are
considered to have material interests in the CNACG Transactions and therefore
have abstained from voting in the relevant Board resolutions in respect of the
CNACG Transactions. Save as disclosed above, none of the Directors have a
material interest in the CNACG 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 CNACG 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 Group, 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 2026, 2027 and 2028 for the CNACG Transactions are fair and
reasonable.
III. SHANGHAI LISTING RULES IMPLICATIONS
As CNACG is controlled by CNAHC, the controlling shareholder of the Company,
CNACG is considered as a related party of the Company according to the
Shanghai Listing Rules. As a result, the transactions between the Group and
CNACG Group constitute related party transactions under the Shanghai Listing
Rules. According to the Shanghai Listing Rules, the transaction amounts of the
proposed annual caps of the CNACG Transactions exceed 5% of the latest audited
net assets of the Company, and therefore shall be disclosed in a timely manner
and be submitted to the general meeting of the Company for consideration and
approval by unrelated shareholders of the Company (i.e. the Independent
Shareholders).
IV. GENERAL INFORMATION
The Company will convene the AGM for the Independent Shareholders to consider
and approve, among other things, the CNACG Framework Agreement, the CNACG
Transactions and the proposed annual caps for the CNACG Transactions.
In respect of the CNACG Transactions, pursuant to Rule 14A.36 of the Hong Kong
Listing Rules, any Shareholder with a material interest in the CNACG
Transactions is required to abstain from voting on the relevant resolutions at
the AGM. As at the date of this announcement, CNACG is a wholly-owned
subsidiary of CNAHC, the controlling shareholder of the Company. Therefore,
CNAHC and CNACG are required to abstain from voting on the resolution(s) in
respect of the CNACG Transactions at the AGM.
The Independent Board Committee comprising all the independent non-executive
Directors has been established to advise the Independent Shareholders on the
Non-exempt Transactions. BaoQiao Partners has been appointed as the
Independent Financial Adviser of the Company to advise the Independent Board
Committee and the Independent Shareholders in this regard.
A circular containing, among others, (i) details regarding the CNACG
Transactions; (ii) a letter from the Independent Financial Adviser to the
Independent Board Committee and the Independent Shareholders regarding its
advice on the Non-exempt Transactions; and (iii) the recommendation from the
Independent Board Committee regarding the Non-exempt Transactions, will be
published by the Company on or before 4 June 2025.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following
terms shall have the meanings as set out below:
"2022 Circular" the circular issued by the Company on 28 September 2022 to the Shareholders in
respect of, among other things, the CNACG Transactions
"AGM" the annual general meeting of the Company for the year ended 31 December 2024
to be held by the Company
"associate(s)" has the meaning ascribed to it under the Hong Kong Listing Rules
"Board" the board of Directors of the Company
"CNACG" China National Aviation Corporation (Group) Limited, a company incorporated
under the laws of Hong Kong and a wholly-owned subsidiary of CNAHC and a
substantial shareholder of the Company, which directly holds approximately
11.18% of the Company's issued share capital as at the date of this
announcement
"CNAHC" China National Aviation Holding Corporation Limited, a PRC state- owned
enterprise and the controlling shareholder of the Company, directly and
through its wholly-owned subsidiary CNACG, holding approximately 53.71% of the
issued share capital of the Company in aggregate as at the date of this
announcement
"CNACG Group" CNACG, its subsidiaries and 30%-controlled companies (as defined under Hong
Kong Listing Rules)
"CNACG Framework Agreement" the framework agreement dated 30 October 2019 entered into between the Company
and CNACG in respect of the CNACG Transactions
"CNACG Transactions" the continuing connected transactions contemplated under the CNACG Framework
Agreement between members of the Group on the one hand, and members of the
CNACG Group on the other hand, but excluding the various services, such as
airline catering service, housing rental, etc., that have been included or
will be included in the continuing connected transaction framework agreements
entered into between the Company and CNAHC
"Company" or "Air China" Air China Limited, a company incorporated in the PRC, whose H Shares are
listed on the Hong Kong 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. The Company is
principally engaged in providing air passenger, air cargo and related services
"connected person(s)" has the meaning ascribed to it under the Hong Kong Listing Rules
"Director(s)" the director(s) of the Company
"Group" the Company and its subsidiaries from time to time
"HK$" Hong Kong dollar, the lawful currency of Hong Kong
"Hong Kong" Hong Kong Special Administrative Region of the PRC
"Hong Kong Listing Rules" The Rules Governing the Listing of Securities on the Hong Kong Stock Exchange
"Hong Kong Stock Exchange" The Stock Exchange of Hong Kong Limited
"H Share(s)" ordinary share(s) in the share capital of the Company, with a nominal value of
RMB1.00 each, which are listed on the Hong Kong Stock Exchange as primary
listing venue and have been admitted into the Official List of the UK Listing
Authority as secondary listing venue
"H Shareholder(s)" holders of the H Shares
"Independent Board Committee" a board committee comprising Mr. Xu Niansha, Mr. He Yun, Ms. Winnie Tam
Wan-chi and Mr. Gao Chunlei, all being the independent non-executive
Directors, to advise the Independent Shareholders on the Non-exempt
Transactions
"Independent Financial Adviser" or "BaoQiao Partners" BaoQiao Partners Capital Limited, a corporation licensed to carry out Type 6
(advising on corporate finance) regulated activity under the SFO, being the
independent financial adviser to the Independent Board Committee and the
Independent Shareholders to advise on the Non-exempt Transactions
"Independent Shareholders" in respect of the CNACG Transactions, the Shareholders of the Company other
than CNAHC and its associate(s)
"Non-exempt Transactions" the finance and operating leases entered into by the Group as lessee under the
CNACG Transactions, the highest applicable percentage ratio of the proposed
annual cap in respect of the total value of right-of-use assets of which is,
on an annual basis, higher than 5% but less than 25%
"RMB" Renminbi, the lawful currency of the PRC
"Shanghai Listing Rules" the Rules Governing the Listing of Stocks on Shanghai Stock Exchange
"Shareholder(s)" holder(s) of the shares of the Company
"substantial shareholder(s)" has the meaning ascribed to it under the Hong Kong Listing Rules
"%" per cent
By Order of the Board
Air China Limited
Xiao Feng Huen Ho Yin
Joint Company Secretaries
Beijing, the PRC, 28 May 2025
As at the date of this announcement, the directors of the Company are Mr. Ma
Chongxian, Mr. Wang Mingyuan, Mr. Cui Xiaofeng, Mr. Patrick Healy, Mr. Xiao
Peng, Mr. Xu Niansha*, Mr. He Yun*, Ms. Winnie Tam Wan-chi* and Mr. Gao
Chunlei*.
* Independent non-executive director of the Company
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