REG - Air China Ld - JOINT ANNOUNCEMENT
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RNS Number : 5846L Air China Ld 05 June 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.
AIR CHINA LIMITED CATHAY PACIFIC AIRWAYS LIMITED
(a joint stock limited company incorporated in (Incorporated in Hong Kong with limited liability)
the People's Republic of China with limited liability) (Stock Code: 293)
(Stock Code: 753)
Joint Announcement Continuing Connected Transactions
Reference is made to the joint announcements dated 26th June 2008, 10th
September 2010, 26th September 2013, 30th August 2016, 28th August 2019 and
30th August 2022 issued by Air China and Cathay Pacific in connection with the
Framework Agreement entered into between Air China and Cathay Pacific on 26th
June 2008. The Framework Agreement was renewed on 1st October 2022 for a term
of three years from 1st January 2023 to 31st December 2025. As the parties
expect that certain transactions contemplated under the Framework Agreement
will continue after 31st December 2025, Air China and Cathay Pacific entered
into the New Framework Agreement on 28th May 2025, on the terms outlined in
this announcement.
As Air China is a substantial shareholder and therefore a connected person of
Cathay Pacific, transactions between members of Cathay Pacific Group on the
one hand, and members of Air China Group and Air China's 30%-controlled
Corporations on the other hand, constitute continuing connected transactions
for Cathay Pacific under Rule 14A.31 of the Listing Rules and are subject to
reporting, annual review and announcement requirements under Chapter 14A of
the Listing Rules.
As Cathay Pacific is a substantial shareholder and therefore a connected
person of Air China, transactions between members of Air China Group on the
one hand, and members of Cathay Pacific Group and Cathay Pacific's
30%-controlled Corporations on the other hand, constitute continuing connected
transactions for Air China under Rule 14A.31 of the Listing Rules and are
subject to reporting, annual review and announcement requirements under
Chapter 14A of the Listing Rules.
As Air China's A shares are listed on the Shanghai Stock Exchange, the
entering into of the New Framework Agreement will be subject to Air China's
shareholders' approval pursuant to the applicable Shanghai Listing Rules. Air
China will provide its shareholders with a circular containing information
about the New Framework Agreement, as soon as practicable and in compliance
with the relevant rules and regulations.
New Framework Agreement dated 28th May 2025
Parties: (1) Air China
(2) Cathay Pacific
1. Background and Particulars
Reference is made to the joint announcements dated 26th June 2008, 10th
September 2010, 26th September 2013, 30th August 2016, 28th August 2019 and
30th August 2022 issued by Air China and Cathay Pacific in connection with the
Framework Agreement entered into between Air China and Cathay Pacific on 26th
June 2008. The Framework Agreement was renewed on 1st October 2022 for a term
of three years from 1st January 2023 to 31st December 2025. As the parties
expect that certain transactions contemplated under the Framework Agreement
will continue after 31st December 2025, Air China and Cathay Pacific entered
into the New Framework Agreement on 28th May 2025.
The Framework Agreement provided the framework governing the execution,
renewal and extension of the relevant agreements between members of Air China
Group on the one hand and members of Cathay Pacific Group on the other hand.
Historically, transactions involving 30%-controlled Corporations of either Air
China or Cathay Pacific were de minimis in value, and therefore were not
included in the Framework Agreement. However, in light of the evolving
business development between Air China Group (including Air China's
30%-controlled Corporations) and Cathay Pacific Group (including Cathay
Pacific's 30%-controlled Corporations), the volume of transactions are
expected to grow substantially.
To accommodate such anticipated expansion and ensure efficient governance, the
New Framework Agreement extends coverage to include each party's
30%-controlled Corporations. The expanded scope will facilitate seamless
collaboration. By broadening the framework to cover these transactions, the
New Framework Agreement enhances operational flexibility, improves management
efficiency and supports the deepening partnership between Air China and Cathay
Pacific.
The transactions contemplated under the New Framework Agreement include those
arising from interline arrangements, code sharing arrangements, joint
operating arrangements, aircraft leasing, frequent flyer programmes, the
provision of airline catering, ground support and engineering services,
inbound / outbound cargo handling services and other services agreed to be
provided and other transactions agreed to be undertaken under the New
Framework Agreement.
Except for the expanded scope under the New Framework Agreement and the
corresponding changes in pricing policies thereunder, other material terms of
the Framework Agreement remain unchanged.
As Air China is a substantial shareholder and therefore a connected person of
Cathay Pacific, transactions between members of Cathay Pacific Group on the
one hand and members of Air China Group and Air China's 30%-controlled
Corporations on the other hand constitute continuing connected transactions
for Cathay Pacific under Rule 14A.31 of the Listing Rules and are subject to
reporting, annual review and announcement requirements under Chapter 14A of
the Listing Rules.
As Cathay Pacific is a substantial shareholder and therefore a connected
person of Air China, transactions between members of Air China Group on the
one hand and members of Cathay Pacific Group and Cathay Pacific's
30%-controlled Corporations on the other hand constitute continuing connected
transactions for Air China under Rule 14A.31 of the Listing Rules and are
subject to reporting, annual review and announcement requirements under
Chapter 14A of the Listing Rules.
As Air China's A shares are listed on the Shanghai Stock Exchange, the
entering into of the New Framework Agreement will be subject to Air China's
shareholders' approval pursuant to the applicable Shanghai Listing Rules. The
New Framework Agreement is conditional upon such shareholders' approval. If
such condition is satisfied, the New Framework Agreement will come into effect
on 1st January 2026.
The New Framework Agreement will be renewed automatically for successive
periods of three years after the three years term ending on 31st December
2028, subject to each party's compliance with relevant requirements, including
obtaining board and/or shareholders' approvals (if applicable), in accordance
with applicable laws, rules and regulations (including the listing rules of
the stock exchange(s) where the parties' shares are respectively listed).
Either party may terminate the agreement by giving the other party notice of
termination of not less than three months, expiring on any 31st December.
2. Pricing Terms and Policies
The following table outlines the relevant pricing terms and policies for the
respective transactions contemplated under the New Framework Agreement:
Transaction Pricing Terms and Policies
Interline arrangements and codeshare arrangements Revenue is apportioned between the parties in accordance with bilateral
prorate agreements which follow the principles in the Multi-lateral Prorate
Agreement of International Air Transport Association.
Joint operating arrangements Revenue is apportioned between the parties having regard to the fleet capacity
of both parties and the values of seats sold by each party.
Aircraft leasing Rentals payable under aircraft leases are determined after negotiations at
arm's length between the parties having regard to rentals payable under
comparable leases by at least two unconnected parties
for comparable aircraft and comparable
Transaction Pricing Terms and Policies
periods and prevailing long term interest rates.
Frequent flyer programmes Frequent flyers of either party can earn mileage credits by taking the other
party's flights. Payments by each party to the other for mileage values are
determined by the parties on an arm's length basis having regard to comparable
mileage values payable by at least two unconnected airlines to the relevant
party.
Airline catering The parties determine the pricing of airline catering having regard to
quotations provided by at least two unconnected caterers, taking due account
of material and labour costs, quality, assurance of supply, safety and
innovation of similar catering products (including changes in the foregoing
matters).
Ground support and engineering services The pricing of ground support and engineering services charged by one party to
the other party is required to be no less favourable than that offered for
comparable services of similar scope to at least two unconnected parties
taking due account of the quality of services.
Inbound/outbound cargo handling services The pricing of cargo handling services charged by one party to the other party
is required to be no less favourable than that offered for comparable services
of similar scope to at least two unconnected parties taking due account of the
quality of services.
Other products and services The pricing of other products and services, including leasing premises and
handling customs clearance, is determined having regard to relevant market
information to ensure fairness and reasonableness and to ensure the offer is
comparable to those offered by unrelated third parties.
This includes soliciting at least two independent third-party quotations
for comparable products in similar quantities and services of similar
scope. Additionally, the costs incurred by the relevant party and the quality
of products and services, including any changes in these factors, are taken
into
consideration.
The pricing terms and policies as set out above have been, and any variation
of it will be, negotiated between Cathay Pacific and Air China at arm's
length. If comparable market prices for the relevant products and services as
described above are available, the parties agree to obtain, verify and compare
quotations and terms from at least two independent parties to ensure the
fairness and reasonableness of their terms.
3. Annual Caps
For the purpose of setting the annual caps in respect of the continuing
connected transactions of Cathay Pacific and Air China, the Transactions
contemplated under the New Framework Agreement involve the following
transactions, namely:
(i) Cathay Pacific CCTs: Transactions between Cathay Pacific
Group on the one hand and Air China Group and Air China's 30% controlled
Corporations on the other hand, which constitute continuing connected
transactions for Cathay Pacific under Rule 14A.31 of the Listing Rules; and
(ii) Air China CCTs: Transactions between Air China Group on
the one hand and Cathay Pacific Group and Cathay Pacific's 30%-controlled
Corporations on the other hand, which constitute continuing connected
transactions for Air China under Rule 14A.31 of the Listing Rules.
(A) Annual caps for continuing connected transactions of Cathay Pacific Group
The table below sets out the historical payments and the corresponding annual
caps for the Cathay Pacific CCTs contemplated under the New Framework
Agreement:
Historical amounts (HK$ million) Annual caps (HK$ million)
Financial years ended 31st December Fina
ncia
l
year
s
endi
ng
31st
Dece
mber
2022 2023 2024 2025 2026 2027 2028
(Note)
The payments made by Cathay Pacific Group to Air China Group and/or Air 83 225 429 900 800 900 1,000
China's 30%- controlled
Corporations
The payments received by Cathay Pacific Group from 26 74 110 900 700 800 900
Air China Group and/or Air China's 30%-controlled
Corporations
Notes:
1. Reference is made to the joint announcement made on 30th August 2022
issued by Air China and Cathay Pacific. The prescribed 2025 annual caps for
(i) payments made by Cathay Pacific Group to Air China Group, and (ii)
payments made by Air China Group to Cathay Pacific Group, in each case,
excluding transactions involving Air China's 30%-controlled Corporations is
HK$900 million respectively.
2. For the avoidance of doubt, for transactions between Cathay Pacific
Group and Air China's 30%-controlled Corporations, the actual transaction
amount for the period between 1st January 2025 and 30th April 2025 was and the
expected transaction amount for the year ending 31st December 2025 will be
within the de minimis threshold under the Listing Rules.
(B) Annual caps for continuing connected transactions of Air China Group
The table below sets out the historical payments and the corresponding annual
caps for the Air China CCTs contemplated under the New Framework Agreement:
Historical amounts (HK$ million) Annual caps (HK$ million)
Financial years ended 31st December Fina
ncia
l
year
s
endi
ng
31st
Dece
mber
2022 2023 2024 2025 2026 2027 2028
(Note)
The payments made by Air China Group to Cathay Pacific Group and/or Cathay 25 84 133 900 700 800 900
Pacific's 30%-controlled
Corporations
The payments received by Air China Group from Cathay Pacific Group and/or 36 174 365 900 800 900 1,000
Cathay Pacific's 30%-
controlled Corporations
Notes:
1. Reference is made to the joint announcement made on 30th August 2022
issued by Air China and Cathay Pacific. The prescribed 2025 annual caps for
(i)payments made by Air China Group to Cathay Pacific Group, and (ii) payments
made by Cathay Pacific Group to Air China Group, in each case, excluding
transactions involving Cathay Pacific's 30%-controlled Corporations is HK$900
million respectively.
2. For the avoidance of doubt, for transactions between Air China Group
and Cathay Pacific's 30%-controlled Corporations, the actual transaction
amount for the period between 1st January 2025 and 30th April 2025 was and the
expected transaction amount for the year ending 31st December 2025 will be
within the de minimis threshold under the Listing Rules.
(C) Determination of annual caps for continuing connected transactions of Cathay Pacific and Air China
The following key factors are considered in determining the above annual caps
set for continuing connected transactions under the New Framework Agreement:
(1) the historical transaction volume and the estimated transaction amounts
for 2025;
(2) the operational needs of both Air China Group and Cathay Pacific Group,
including amongst other things, the projections of each party's fleet sizes,
the delivery schedules of new aircraft, the anticipated annual growth in
flights scheduled for Hong Kong;
(3) the expanded scope under the New Framework Agreement to include each
party's 30%-controlled Corporations, as well as the potential increase in the
number of subsidiaries of both parties over time; and
(4) foreign exchange fluctuations and a buffer of 5% have been incorporated
to account for potential unplanned increases in aircraft maintenance services
and other unforeseen factors, allowing for sufficient flexibility to
accommodate future developments.
For the avoidance of doubt, transactions between Air China's 30%-controlled
Corporations and Cathay Pacific's 30%-controlled Corporations do not
constitute connected transactions for either Cathay Pacific or Air China under
the Listing Rules, and hence are not covered under the New Framework
Agreement. Consequently, these transactions are not accounted for under the
annual caps outlined above.
4. Reasons for, and benefits of, entering into the New Framework Agreement
The cooperation between Air China Group and Cathay Pacific Group is expected
to continue to further the development of Beijing Capital International
Airport and Hong Kong International Airport as gateways to and hubs for
Chinese Mainland and Hong Kong and will assist Air China Group and Cathay
Pacific Group in their efforts to optimise the allocation of operating
resources.
5. Connection between the parties
Air China, by virtue of its 29.98% shareholding in Cathay Pacific, is a
substantial shareholder and therefore a connected person of Cathay Pacific
under the Listing Rules.
Cathay Pacific, by virtue of its 15.09% shareholding in Air China, is a
substantial shareholder and therefore a connected person of Air China under
the Listing Rules.
6. Compliance with Listing Rules
With respect to Cathay Pacific
As the highest of the applicable percentage ratios as defined under Rule 14.07
of the Listing Rules in respect of the annual caps applicable to each of the
(i) payments made by Cathay Pacific Group to Air China Group and/or Air
China's 30%-controlled Corporations, and (ii) payments received by Cathay
Pacific Group from Air China Group and/or Air China's 30%-controlled
Corporations is, on an annual basis, more than 0.1% but less than 5%, such
transactions constitute continuing connected transactions for Cathay Pacific
which are subject to the announcement, annual review and annual reporting
requirements but are exempt from the circular (including independent financial
advice) and shareholders' approval requirements under Chapter 14A of the
Listing Rules.
With respect to Air China
As the highest of the applicable percentage ratios as defined under Rule 14.07
of the Listing Rules in respect of the annual caps applicable to each of the
(i) payments made by Air China Group to Cathay Pacific Group and/or Cathay
Pacific's 30%-controlled Corporations, and (ii) payments received by Air China
Group from Cathay Pacific Group and/or Cathay Pacific's 30%-controlled
Corporations is, on an annual basis, more than 0.1% but less than 5%, such
transactions constitute continuing connected transactions for Air China which
are subject to the announcement, annual review and annual reporting
requirements but are exempt from the circular (including independent financial
advice) and shareholders' approval requirements under Chapter 14A of the
Listing Rules.
Each of Air China and Cathay Pacific will comply with the continuing
obligations under Rules 14A.55-59 of the Listing Rules and will re-comply with
the relevant Listing Rules if the annual caps are exceeded, when the New
Framework Agreement is renewed or when there is a material change to its
terms.
7. Requirement for Air China's shareholders' approval
Air China's A shares are listed on the Shanghai Stock Exchange. As Cathay
Pacific is a substantial shareholder of Air China, Cathay Pacific is
considered as a related party of Air China according to the Shanghai Listing
Rules. As a result, the transactions between Air China Group and Cathay
Pacific Group constitute related party transactions of Air China under the
Shanghai Listing Rules. According to the Shanghai Listing Rules, the
transactions contemplated under the New Framework Agreement shall be submitted
to the general meeting of Air China for consideration and approval. Air China
will provide its shareholders with a circular containing information about the
New Framework Agreement as soon as practicable and in compliance with the
relevant rules and regulations.
8. Opinion of the directors
The Air China Directors, including the independent non-executive directors,
consider that the terms of the New Framework Agreement are fair and reasonable
and that the New Framework Agreement is (i) on normal commercial terms or
better and in the ordinary and usual course of business of Air China Group,
and (ii) in the interests of Air China and its shareholders as a whole.
The Cathay Pacific Directors, including the independent non-executive
directors, consider that the terms of the New Framework Agreement are fair and
reasonable and that the New Framework Agreement is (i) on normal commercial
terms or better and in the ordinary and usual course of business of Cathay
Pacific Group, and (ii) in the interests of Cathay Pacific and its
shareholders as a whole.
Ma Chongxian, Wang Mingyuan and Patrick Healy, being directors of Cathay
Pacific, are materially interested in the transactions contemplated under the
New Framework Agreement and have abstained from voting on the relevant board
resolutions of Air China in respect of the aforementioned transactions.
Patrick Healy, Ma Chongxian and Wang Mingyuan, being directors of Air China,
and Sun Yuquan and Xiao Feng, holding positions in Air China, are materially
interested in the transactions contemplated under the New Framework Agreement
and have abstained from voting on the relevant board resolutions of Cathay
Pacific in respect of the aforementioned transactions.
9. Internal controls
In order to ensure that the continuing connected transactions between Cathay
Pacific Group and Air China Group are being conducted in a fair and reasonable
manner, each of Cathay Pacific and Air China has adopted the following
internal control procedures:
(i) each of Cathay Pacific and Air China conducts
regular reviews to ensure that the transaction amounts of the continuing
connected transactions are within the relevant annual caps;
(ii) each of Cathay Pacific's and Air China's independent
non-executive Directors will review Cathay Pacific Group's and Air China
Group's respective continuing connected transactions on an annual basis as
required under Rule 14A.55 of the Listing Rules and confirm in each of Cathay
Pacific's and Air China's annual report whether the continuing connected
transactions have been entered into (a) in the ordinary and usual course of
business of Cathay Pacific Group and Air China Group respectively; (b) on
normal commercial terms or better; and (c) the terms of the agreements
governing the relevant transactions are fair and reasonable and in the
interests of each of Cathay Pacific and Air China and their respective
shareholders as a whole; and
(iii) for compliance with Rule 14A.56 of the Listing Rules,
each of Cathay Pacific and Air China will also engage its external auditors to
conduct an annual review of the respective continuing connected transactions
of Cathay Pacific and Air China to ensure that, among others, the transactions
(a) have been approved by the Cathay Pacific Directors and Air China Directors
respectively, (b) were, in all material respects, in accordance with
the respective pricing policies of Cathay Pacific and Air China (including,
but not limited to, those set out in the section “Pricing Terms and
Policies” in this announcement) if the transactions involve the provision
of goods or services by Cathay Pacific and/or Air China, (c) were conducted,
in all material respects, in accordance with the terms of the relevant
agreements, and (d) have not exceeded the relevant annual caps.
10. Directors
Air China
As at the date of this announcement, the Air China Directors are:
Executive Directors: Ma Chongxian (Chairman), Wang Mingyuan; Non-Executive
Directors: Cui Xiaofeng, Patrick Healy;
Employee Representative Director: Xiao Peng; and
Independent Non-Executive Directors: Xu Niansha, He Yun, Winnie Tam Wan-chi,
and Gao Chunlei.
Cathay Pacific
As at the date of this announcement, the Cathay Pacific Directors are:
Executive Directors: Patrick Healy (Chair), Ronald Lam, Lavinia Lau, Alexander
McGowan, Rebecca Sharpe;
Non-Executive Directors: Ma Chongxian (Deputy Chair), Guy Bradley, Gordon
McCallum, Sun Yuquan, Merlin Swire, Augustus Tang, Wang Mingyuan, Xiao Feng;
and
Independent Non-Executive Directors: Bernard Chan, Lily Cheng, Christoph
Mueller and Wang Xiao Bin.
11. Definitions
"30%-controlled company" Has the meaning given to it under the Listing Rules.
"30%-controlled Corporations" 30%-controlled companies and their subsidiaries.
"Air China" Air China Limited, a company incorporated in the People's Republic of China,
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. The
principal activity of Air China is the operation of scheduled airline
services.
"Air China CCTs" Has the meaning ascribed to it under the section headed "3. Annual Caps".
"Air China Directors" The directors of Air China.
"Air China Group" Air China and its subsidiaries from time to time.
"Cathay Pacific" Cathay Pacific Airways Limited, a company incorporated in Hong Kong and listed
on the Stock Exchange, the principal activity of which is the operation of
scheduled airline services.
"Cathay Pacific CCTs" Has the meaning ascribed to it under the section headed "3. Annual Caps".
"Cathay Pacific Directors" The directors of Cathay Pacific.
"Cathay Pacific Group" Cathay Pacific and its subsidiaries from time to time.
"Framework Agreement" The framework agreement dated 26th June 2008 between Air China and Cathay
Pacific governing the execution, renewal and extension of the relevant
agreements between members of Air China Group on the one hand and members of
Cathay Pacific Group on the other hand.
"Hong Kong" The Hong Kong Special Administrative Region of the People's Republic of China.
"Listing Rules" The Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited.
"New Framework Agreement" The new framework agreement dated 28th May 2025 between Air China and Cathay
Pacific governing the execution, renewal and extension of the relevant
agreements between members of Air China Group on the one hand and members of
Cathay Pacific Group and Cathay Pacific's 30%- controlled Corporations (where
applicable) on the other hand, as well as members of Cathay Pacific Group on
the one hand and members of Air China Group and Air China's 30%- controlled
Corporations (where applicable) on the other hand, as outlined in this
announcement.
"Shanghai Listing Rules" The Rules Governing the Listing of Stocks on Shanghai Stock Exchange.
"Stock Exchange" The Stock Exchange of Hong Kong Limited.
"Transactions" Transactions between members of Air China Group on the one hand and members of
Cathay Pacific Group and Cathay Pacific's 30%-controlled Corporations (where
applicable) on the other hand, as well as members of Cathay Pacific Group on
the one hand and members of Air China Group and Air China's 30%-controlled
Corporations (where applicable) on the other hand arising from joint venture
arrangements for the operation of passenger air
transportation, code sharing arrangements, interline
arrangements, aircraft leasing, frequent flyer programmes, the
provision of airline catering, ground support and engineering services,
inbound/outbound cargo handling services and other services agreed to be
provided and other transactions agreed to be undertaken under the Framework
Agreement or the New Framework Agreement, as applicable.
By Order of the Board By Order of the Board
Air China Limited Cathay Pacific Airways Limited
Xiao Feng Huen Ho Yin Joint Company Secretaries Joanna Lai Company Secretary
Beijing, 28th May 2025 Hong Kong, 28th May 2025
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