REG - Air China Ld - MAJOR TRANSACTION PURCHASE OF DOMESTIC AIRCRAFT

Air ChinaAnnouncement

29/04/2024 07:00

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RNS Number : 3712M  Air China Ld  29 April 2024

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)

MAJOR TRANSACTION PURCHASE OF DOMESTIC AIRCRAFT

 

On 26 April 2024, the Company entered into the COMAC Aircraft Purchase
Agreement with COMAC, pursuant to which the Company has agreed to purchase the
COMAC Aircraft from COMAC.

 

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

 

A circular containing, among other things, (i) further information in relation
to the COMAC Aircraft Purchase; and (ii) other information as required under
the Listing Rules is expected to be despatched to the Shareholders on or
before 25 June 2024 to allow sufficient time for the preparation of the
relevant information for inclusion in the circular.

 

BACKGROUND

 

On 26 April 2024, the Company entered into the COMAC Aircraft Purchase
Agreement with COMAC, pursuant to which the Company has agreed to purchase the
COMAC Aircraft from COMAC.

THE COMAC AIRCRAFT PURCHASE AGREEMENT

 

The principal terms of the COMAC Aircraft Purchase Agreement are set out as
follows:

 

Date

 

26 April 2024

 

Parties

 

(a)     the Company, as the purchaser, the principal business activities
of which are air passenger, air cargo and airline-related services; and

 

(b)     COMAC, as the vendor, one of the principal business activities of
which is civil aircraft manufacturing.

 

As at the date of this announcement, COMAC is owned as to 49.80% by the SASAC
of the State Council, 20.92% by Shanghai Guosheng (Group) Co., Ltd.
(上海國盛（集團）有限公司), which is directly wholly-owned by
Shanghai SASAC, and the remaining 29.28% of the shareholdings are

owned by multiple shareholders, each holding less than 10% in COMAC. To the
best of the knowledge, information and belief of the Directors after having
made all reasonable enquiries, COMAC and its ultimate beneficial owner(s) are
third parties independent of the Company and its connected persons (as defined
under the Listing Rules).

 

Aircraft to be acquired

 

100 C919 aircraft (Extended-ranged Version)

 

Consideration

 

The aircraft basic price comprises the airframe price, add-on features price
and engine price.

 

According to the latest price catalogue provided by COMAC, the basic price of
the COMAC Aircraft to be acquired by the Company, in aggregate, is
approximately US$10,800 million (equivalent to approximately HK$84,240 million
at an exchange rate of US$1 = HK$7.80).

 

COMAC has granted to the Company considerable price concessions with regard to
the COMAC Aircraft. Such price concessions were determined after arm's length
negotiations between the parties and as a result, the actual consideration for
the COMAC Aircraft Purchase is lower than the aircraft basic price mentioned
above.

 

The COMAC Aircraft Purchase Agreement 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 COMAC Aircraft
Purchase is fair and reasonable and comparable with the price concessions
provided under the previous similar transactions. The Company believes that
there is no material impact of the price concessions obtained in the COMAC
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
considerable price concessions and hence a significant negative impact on the
Group's cost for the COMAC Aircraft Purchase and will therefore not be in the
interests of the Company and the Shareholders as a whole.

Accordingly, the Company has applied to the Stock Exchange and the Stock
Exchange has granted such waiver from strict compliance with Rule 14.58(4) of
the Listing Rules in respect of disclosure of the actual consideration of the
COMAC Aircraft Purchase.

 

Payment and delivery terms

 

The aggregate consideration for the COMAC Aircraft Purchase is payable by cash
in instalments. The Company is expecting to take delivery of the COMAC
Aircraft in stages from 2024 to 2031.

 

Source of funding

 

The COMAC Aircraft Purchase will be funded by self-owned cash, commercial bank
loans and other financing methods. The COMAC Aircraft Purchase is expected to
have no material impact on the cash flow and business operation of the
Company.

 

REASONS FOR AND BENEFITS OF THE COMAC AIRCRAFT PURCHASE

 

The Transaction is in line with the development plan of the Company and the
market demand, which is conducive to the Group's optimization of fleet
structure and long-term supplement of fleet capacity. The Transaction will
expand the fleet capacity of the Group, the Transaction is expected to
increase the fleet capacity of the Group by approximately 7.5%, based on the
number of available tonne kilometers of the Group as at 31 December 2023
without taking into account the potential adjustments to the fleet such as
aircraft withdrawal due to market condition and aircraft aging. The new
aircraft will be delivered in stages from 2024 to 2031, with some aimed at
meeting the renewal needs due to the withdrawal of aging aircraft from the
fleet. The actual net increase in fleet capacity will be maintained within a
manageable range.

 

The Directors believe that the COMAC Aircraft Purchase is conducted in the
ordinary and usual course of business of the Group on normal commercial terms
and the terms of the COMAC Aircraft Purchase Agreement 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 COMAC Aircraft Purchase is above 25% but less than 100%, the
COMAC Aircraft Purchase contemplated under the COMAC Aircraft Purchase
Agreement constitutes a major transaction of the Company and is subject to the
reporting, announcement and Shareholders' approval requirements under Chapter
14 of the Listing Rules.

 

GENERAL

 

A circular containing, among other things, (i) further information in relation
to the COMAC Aircraft Purchase; and (ii) other information as required under
the Listing Rules is expected to be despatched to the Shareholders on or
before 25 June 2024 to allow sufficient time for the preparation of the
relevant information for inclusion in the circular.

 

DEFINITION

 

In this announcement, unless the context otherwise requires, the following
expressions have the following meanings:

 

 "Board"                                     the board of directors of the Company

 "COMAC"                                     The Commercial Aircraft Corporation of China, Ltd., a company incorporated in
                                             the PRC with limited liability

 "COMAC Aircraft"                            100 C919 aircraft (Extended-ranged Version) to be purchased by the  Company
                                             pursuant  to  the  COMAC  Aircraft  Purchase

                                             Agreement

 "COMAC Aircraft Purchase" or "Transaction"  the purchase by the Company of the COMAC Aircraft pursuant to the COMAC
                                             Aircraft Purchase Agreement

 "COMAC Aircraft Purchase Agreement"         the aircraft purchase agreement dated 26 April 2024 entered into between the
                                             Company and COMAC, pursuant to which the Company  has  agreed  to
                                             purchase  the  COMAC  Aircraft  from

                                             COMAC

 "Company"                                   Air China Limited, a company incorporated in the People's Republic of China,
                                             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

 "connected person"                          has the meaning ascribed thereto under the Listing Rules

 "Director(s)"     the director(s) of the Company

 "Group"           the Company and its subsidiaries

 "HK$"             Hong Kong dollar, the lawful currency of Hong Kong

 "Hong Kong"       the 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

 "SASAC"           State-owned Assets Supervision and Administration Commission

 "Shareholder(s)"  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

Xiao Feng   Huen Ho Yin
 Joint Company Secretaries

Beijing, the PRC, 26 April 2024

 

As at the date of this announcement, the directors of the Company are Mr. Ma
Chongxian, Mr. Wang Mingyuan, Mr. Feng Gang, Mr. Patrick Healy, Mr. Xiao Peng,
Mr. Li Fushen*, Mr. He Yun*, Mr. Xu Junxin* and Ms. Winnie Tam Wan-chi*.

 

*    Independent non-executive director of the Company

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