UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________
FORM
6-K
Report
of Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16
under
the Securities Exchange Act of 1934
For
the
month of April 2008.
Commission
File Number: 001-14550
China
Eastern Airlines Corporation Limited
———————————————————————————————————
(Translation
of Registrant’s name into English)
2550
Hongqiao Road
Hongqiao
Airport
Shanghai,
China 200335
———————————————————————————————————
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F: x Form
20-F o Form
40-F
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1): o
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7): o
Indicate
by check mark whether the registrant by furnishing the information contained
in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934: o Yes x No
If
"Yes"
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): n/a
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| China Eastern Airlines Corporation Limited | ||
| |
|
(Registrant) |
| Date April 30, 2008 | By: | /s/ Li Fenghua |
|
Name: Li Fenghua |
||
| Title: Chairman of the Board of Directors | ||
Certain
statements contained in this announcement may be regarded as "forward-looking
statements" within the meaning of the U.S. Securities Exchange Act of 1934,
as
amended. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual performance,
financial condition or results of operations of the Company to be materially
different from any future performance, financial condition or results of
operations implied by such forward-looking statements. Further information
regarding these risks, uncertainties and other factors is included in the
Company's filings with the U.S. Securities and Exchange Commission. The
forward-looking statements included in this announcement represent the
Company's
views as of the date of this announcement. While the Company anticipates
that
subsequent events and developments may cause the Company's views to change,
the
Company specifically disclaims any obligation to update these forward-looking
statements, unless required by applicable laws. These forward-looking statements
should not be relied upon as representing the Company's views as of any
date
subsequent to the date of this announcement.
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 howsoever 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: 670)
CONTINUING
CONNECTED TRANSACTIONS
AND
DISCLOSEABLE TRANSACTION
|
Reference
is made to the announcement and circular of the Company dated 12
May 2005
and 19 May 2005 respectively in relation to, amongst others, the
Continuing Connected Transactions in respect of agreements for
the
provision of goods and/or services between certain members of the
CEA
Holding Group and the Group.
The
Company has, in view of the expiration of the agreements relating
to the
Continuing Connected Transactions, entered into respective agreements
relating to the Continuing Connected Transactions.
As
the relevant applicable percentage ratios set out in the Listing
Rules in
respect of the Renewed Continuing Connected Transactions (except
the
Financial Services Transaction and the Catering Services Transaction)
are
expected to be less than 2.5% on an annual basis, such transactions
fall
within Rule 14A.34 of the Listing Rules and are exempted from the
approval
of the Independent Shareholders. In relation to the Financial Services
Transaction and the Catering Services Transaction, as their respective
applicable percentage ratios exceed 2.5% on an annual basis, such
transactions will be subject to approval by the Independent Shareholders
at the AGM as required under the Listing Rules. Furthermore, the
Financial
Services Transaction also constitutes a discloseable transaction
pursuant
to the Listing Rules and are accordingly subject to the relevant
disclosure and reporting requirements.
CEA
Holding and its associate(s), if any, will abstain from voting
at the AGM
on the resolutions approving the Financial Services Transaction
and the
Catering Services Transaction, and the associated annual caps,
which will
be taken on a poll as required under the Listing Rules.
The
Independent Board Committee will be established to advise the Independent
Shareholders in respect of the Financial Services Transaction and
the
Catering Services Transaction, and the associated annual caps.
An
independent financial adviser will be appointed to advise the Independent
Board Committee and the Independent Shareholders on the same.
A
circular containing further information in relation to the Financial
Services Transaction and the Catering Services Transaction as well
as
other related matters, together with notice of the AGM, will be
issued by
the Company and despatched to its shareholders as soon as
practicable.
|
1
CONTINUING
CONNECTED TRANSACTIONS
Background
Reference
is made to the announcement and circular of the Company dated 12 May 2005
and 19
May 2005 respectively in relation to, amongst others, the Continuing Connected
Transactions in respect of agreements for the provision of goods and/or services
between certain members of the CEA Holding Group and the Group.
The
Company has, in view of the expiration of the agreements relating to the
Continuing Connected Transactions, entered into respective agreements relating
to the Continuing Connected Transactions. It is the Company’s intention to
finance the Renewed Continuing Connected Transactions through its internal
resources.
As
the
relevant applicable percentage ratios set out in the Listing Rules in respect
of
the Renewed Continuing Connected Transactions (except the Financial Services
Transaction and the Catering Services Transaction) are expected to be less
than
2.5% on an annual basis, such transactions fall within Rule 14A.34 of the
Listing Rules and are exempted from the approval of the Independent
Shareholders. In relation to the Financial Services Transaction and the Catering
Services Transaction, as their respective applicable percentage ratios exceed
2.5% on an annual basis, such transactions will be subject to approval by
the
Independent Shareholders at the AGM as required under the Listing Rules.
Furthermore, the Financial Services Transaction also constitutes a discloseable
transaction pursuant to the Listing Rules and are accordingly subject to
the
relevant disclosure and reporting requirements.
To
regulate the continuing business relationships between the Group and the
CEA
Holding Group, and in compliance with the applicable requirements under Chapter
14A of the Listing Rules, the Company has entered into various agreements
with
certain members of the CEA Holding Group in respect of the Renewed Continuing
Connected Transactions. These agreements are as follows:
|
Agreements
|
Counterparties
and connected person relationship
|
|
|
1.
|
Property
Leasing Renewal Agreement
|
CEA
Holding
|
|
2.
|
Financial
Services Renewal Agreement
|
東航集團財務有限責任公司
(Eastern Air Group Finance Company Limited) (the “Finance
Company”), which is interested as to approximately 46.25% by, and thus
an
associate of, CEA Holding
|
|
3.
|
Import
and Export Agency Renewal Agreement
|
東方航空進出口有限公司
(Eastern Aviation Import & Export Company) (the “Import &
Export Company”), which is interested as to 55% by, and thus an associate
of, CEA Holding
|
|
4.
|
Maintenance
Services Renewal Agreement
|
上海東方航空設備制造公司
(Shanghai Eastern Aviation Equipment Manufacturing Corporation)
(the “Maintenance Company”), which is a wholly-owned subsidiary, and thus
an associate, of CEA Holding
|
2
|
5.
|
Catering
Services Agreement
|
東方航空食品投資有限公司
(Eastern Air Catering Investment Co. Ltd.) (the “Holding Catering
Company”), which is interested as to 55% by, and thus an associate of,
CEA
Holding
|
|
6.
|
Sales
Agency Services Renewal Agreements
|
A
number of subsidiaries or associates of CEA Holding (collectively,
the
“Sales Companies”)
|
|
7.
|
Advertising
Services Renewal Agreement
|
上海東方航空傳媒有限公司
(Shanghai Eastern Aviation Advertising Company Limited)
(the
“Advertising Company”), which is interested as to 55% by, and thus an
associate of, CEA Holding
|
Certain
charges for the services under the agreements are determined based on tariffs,
if available and applicable, set by the relevant PRC or industry regulatory
authorities. Those transactions where the charges are not set by reference
to
prescribed regulatory tariffs are determined based on commercial negotiations
between the parties, in each case on an arm’s length basis. The terms of these
transactions are, as currently anticipated, no less favourable than the terms
as
may be available to the Group from independent third parties.
In
compliance with the relevant requirements under the Listing Rules, the Company
has set maximum annual consideration or values, or annual caps, in respect
of
each of the Renewed Continuing Connected Transactions. These annual caps
are, to
the extent appropriate, determined by reference to factors including historical
figures and expected future business growth which, in the Directors’ view, are
fair and reasonable.
Property
leasing
|
1.
|
Property
Leasing Renewal
Agreement
|
On
12
May, 2005, the Company entered into a property leasing agreement with CEA
Holding, CEA Northwest and CEA Yunnan, pursuant to which the Company will
lease
from CEA Holding, for use by the Group in its daily airlines and other business
operations (“Existing
Property Leasing Agreement”):
|
(i)
|
a
maximum of altogether 33 land properties owned by CEA Holding through,
and
registered in the name of, CEA Northwest, covering an aggregate
site area
of approximately 692,539 square metres located primarily in Xi’an,
Xianyang and Yongdeng, together with a total of 225 building properties
and related construction, infrastructure and facilities occupying
an
aggregate floor area of approximately 269,148 square metres;
and
|
|
(ii)
|
a
maximum of altogether 7 land properties owned by CEA Holding through,
and
registered in the name of, CEA Yunnan, covering an aggregate site
area of
approximately 420,768 square metres primarily located in Kunming,
together
with a total of 81 building properties and related construction,
infrastructure and facilities occupying an aggregate floor area
of
approximately 457,722 square
metres.
|
3
On
29
April 2008, the Company entered into an agreement relating to the renewal
of the
Property Leasing Agreement in substantially the same terms for a further
term of
3 years, commencing from 1 July 2008 to 30 June 2011, except that in relation
to
the group (ii) properties above where previously there will be a total of
81
building properties and related construction, infrastructure and facilities,
it
will instead, be a total of 77 building properties and related construction,
infrastructure and facilities occupying an aggregate floor area of approximately
452,949 square metres (“Property Leasing Renewal Agreement”). The group (i)
properties above will continue to be leased by the Group without substantial
changes. To streamline administrative matters, CEA Holding is the only
counterparty to the Property Leasing Renewal Agreement.
Pricing
Under
the
Existing Property Leasing Agreement, the Company pays an annual rental in
an
aggregate amount of approximately RMB55.40 million.
The
rental to be paid under the Property Leasing Renewal Agreement remains the
same
save that there will be a deduction of approximately RMB0.26 million for
the
adjustment to be made in relation to the non-inclusion of the 4 building
properties and related construction, infrastructure and facilities as described
above. The annual rental payable under the Property Leasing Renewal Agreement
is
therefore approximately RMB55.14 million, payable half-yearly in advance,
and
are subject to review and adjustments provided that the adjustments shall
not
exceed the applicable inflation rates published by the relevant local PRC
authorities.
Reasons
for and benefits of the transaction
The
Group’s civil aviation business comprise businesses previously operated by CEA
Northwest and CEA Yunnan. Accordingly, properties currently held, occupied
and/or used by CEA Northwest and CEA Yunnan associated with their civil aviation
businesses shall be leased to the Company, such that the Group will be able
to
continue to use such properties in its daily airlines and other business
operations. The Company therefore entered into the Property Leasing Renewal
Agreement which secures the Group its right to use the relevant properties
at
rentals which are no higher, and thus no less favourable, than prevailing
market
rates.
Historical
figures
The
historical figures for the rentals paid pursuant to the Existing Property
Leasing Agreement by the Company for the three financial years ended 31 December
2005, 2006 and 2007 are approximately RMB27.70 million, RMB55.40 million
and
RMB55.40 million respectively.
Annual
caps
Under
the
Property Leasing Renewal Agreement, the Company shall pay annual rentals
in an
aggregate amount of approximately RMB55.14 million to CEA Holdings. Such
rentals
are subject to review and adjustments provided that the adjustments shall
not
exceed the applicable inflation rates published by the relevant local PRC
authorities. Factoring in any anticipated possible inflation, historical
rental
trends and the Directors’s knowledge and understanding of the market, it is
expected that the annual rentals payable by the Company under the Property
Leasing Renewal Agreement will not exceed RMB60.00 million for each of the
three
financial years ending 31 December 2008, 2009 and 2010.
4
Listing
Rule implications
As
the
relevant applicable percentage ratios set out in the Listing Rules in respect
of
the Property Leasing Renewal Agreement is expected to be less than 2.5% on
an
annual basis, such transaction falls within Rule 14A.34 of the Listing Rules
and
is subjected to the reporting and announcement requirements only and is exempted
from the approval by the Independent Shareholders under the Listing
Rules.
Financial
services
|
2.
|
Financial
Services Renewal
Agreement
|
The
Finance Company is a non-bank finance company approved and regulated by the
relevant PRC regulatory authorities including the People’s Bank of China and the
China Banking Regulatory Commission.
On
12
May, 2005, the Company entered into a financial services agreement with the
Finance Company, pursuant to which the Finance Company will from time to
time
provide the Group with a range of financial services including (i) deposit
services, (ii) loan and financing services and (iii) other financial services
such as the provision of trust loans, financial guarantees, credit facilities
and credit references (the scope of “other financial services” under the
Financial Services Renewal Agreement is not limited and different services
may
be provided to the Group as and when they are needed) (“Existing Financial
Services Agreement”).
On
29
April 2008, the Company entered into an agreement relating to the renewal
of the
Financial Services Agreement in substantially the same terms for a further
term
of 3 years.
Pursuant
to the Financial Services Renewal Agreement, the Finance Company shall deposit
all moneys deposited by the Group under the agreement with commercial bank(s)
in
China, including, for example, Industrial and Commercial Bank of China, China
Construction Bank, Bank of Agriculture and Bank of Communications. The Finance
Company has also undertaken under the Financial Services Renewal Agreement
that
all outstanding loans it provides to members of the CEA Holding Group will
not
at any time and from time to time exceed the aggregate amount of its equity
capital, surplus reserves and deposits received from other parties.
Term
Subject
to the approval being obtained from the Independent Shareholders at the AGM,
the
Financial Services Renewal Agreement will be effective for a term of 3 years
commencing from 1 July 2008 to 30 June 2011.
Pricing
Under
the
Financial Services Renewal Agreement:
|
(i)
|
The
Finance Company shall accept deposits from the Group at interest
rates not
lower, and thus no less favourable, than the relevant standard
rates set
by the People’s Bank of China for similar
deposits;
|
5
|
(ii)
|
The
Finance Company shall provide loan and financing services to the
Group at
interest rates not higher than the relevant standard rates set
by the
People’s Bank of China for similar services;
and
|
|
(iii)
|
In
respect of the provision of other financial services, the fees
and charges
payable by the relevant member(s) of the Group to the Finance Company
shall be determined by reference to the applicable standard fees
and
charges as specified by the People’s Bank of China from time to time, and
if no such standard fees and/or charges have been specified by
the
People’s Bank of China for the particular services, such services shall
be
provided by the Finance Company on terms no less favourable than
terms
available from commercial banks in China. The fees and charges,
together
with other details in respect of each specific transaction for
the
particular services, will then be recorded in separate implementation
agreement(s) between the relevant member(s) of the Group and the
Finance
Company in the performance of the Financial Services Renewal
Agreement.
|
The
service charges pursuant to the Financial Services Renewal Agreement are
payable
by the Group as and when the services are utilised.
Reasons
for and benefits of the transaction
As
mentioned above, under the Financial Services Renewal Agreement, the Group
will
receive interest on its moneys deposited with the Finance Company at rates
which
are no less favourable than the standard rates set by the People’s Bank of
China, and will be able obtain loans and financing from the Finance Company
at
interest rates not higher than such standard rates.
Further,
the Company is not restricted under the Financial Services Renewal Agreement
to
approach, and in fact may choose, any bank or financial institution to satisfy
its financial service needs. Its criteria in making the choice could be made
on
costs and quality of services. Therefore, the Group may, but is not obliged
to,
continue to use the Finance Company’s services if the service quality provided
is competitive. Having such flexibility afforded under the Financial Services
Renewal Agreement, the Group is able to better manage its current capital
and
cashflow position. In addition, it is also expected that the Finance Company
will provide more efficient settlement service to the Group, as compared
to
independent third-party banks. Accordingly, the Directors believe that it
is in
the interests of the Company to enter into the Financial Services Renewal
Agreement.
Listing
Rules’ implications
In
respect of the provision of deposit services under the Financial Services
Renewal Agreement, the relevant “percentage ratio” applicable to such
transaction for the purpose of Chapter 14A of the Listing Rules is expected
to
exceed 2.5% on an annual basis in the on-going performance of the agreement.
The
transaction therefore constitutes a non-exempt continuing connected transaction
of the Company under the Listing Rules, and such transaction together with
the
associated annual caps will be subject to the approval by the Independent
Shareholders at the AGM. Furthermore, the Financial Services Transaction
also
constitutes a discloseable transaction pursuant to the Listing Rules and
are
accordingly subject to the relevant disclosure and reporting
requirements.
In
respect of the provision of loan and financing services under the Financial
Services Renewal Agreement, since the services are being provided by the
Finance
Company to the Group at interest rates not higher than the relevant standard
rates set by the People’s Bank of China, the transaction involves provision of
financial assistance by the Finance Company for the benefit of the Group
on
normal commercial terms (or better to the Group) where no security over the
assets of the Group is granted in respect of the financial assistance. This
part
of the transaction is therefore exempted from the reporting, announcement
and
the approval from the Independent Shareholders requirements, by virtue of
Rule
14A.65(4) of the Listing Rules.
6
In
respect of the provision of the “other financial services” under the Financial
Services Renewal Agreement, the Finance Company had not previously provided
any
such services to the Group and any future transaction that may take place
between the Group and the Finance Company in respect of such services is
expected to be minimal. Accordingly, pursuant to Rule 14A.31 such transactions
are exempt from all reporting, announcement and Independent Shareholders
approval requirements. Should such transactions exceed the exemption threshold
in future, the Company will be required to re-comply with the applicable
connected transaction regulatory requirements under Chapter 14A of the Listing
Rules.
Historical
figures
The
historical figures of the deposit services provided by the Finance Company
to
the Group for the three financial years ended 31 December 2005, 2006 and
2007
are approximately RMB513.44 million, RMB1,031.83 million and RMB1,072.09
million
respectively. The Finance Company had not provided any financial services
other
than deposit and loan and financing services to the Group for the three
financial years ended 31 December 2005, 2006 and 2007.
Annual
caps
The
proposed annual caps for deposits pursuant to the Financial Services Renewal
Agreement are mainly based on: (i) the future management of the Group’s cash
resources; and (ii) the anticipated business growth and expansion of the
Group.
The
Group
intends to centralise its cash resources with a few selected financial
institutions in order to improve financial management as well as possibly
benefiting from increased economies of scale due to the centralisation.
Together
with the continuous economic growth in the PRC, the Directors are optimistic
and
anticipates that the domestic air transportation market will continue to
grow in
the near future. The Group will also be introducing a number of new aircrafts
which will commission into service in 2008 to meet the raising demand.
Accordingly, it is expected that the volume of the Group’s cashflow will
increase.
Having
considered the historical figures and taking account of the circumstances
above,
the maximum daily outstanding balance of deposits as contemplated under the
Financial Services Renewal Agreement is not expected to exceed RMB2,500 million
for each of the three financial years ending 31 December 2008, 2009 and 2010,
taking into account the anticipated gradual and organic growth of the Group’s
business over these years.
The
Directors believe that these proposed annual caps will be able to provide
the
Group with sufficient flexibility for its expected future financial arrangements
with the Finance Company.
Import/export
agency services
|
3.
|
Import
and Export Agency
Agreement
|
The
Import & Export Company is a company approved by the PRC Ministry of
Commerce and is licensed to engage in the business of import and export of
aircraft and related aviation equipment and materials in the PRC.
7
On
12 May
2005, the Company entered into an import and export agency agreement with
the
Import & Export Company, pursuant to which the Import & Export Company
will from time to time as its agent provide the Group with agency services
for
the import and export of aircraft and related raw materials, accessories,
machinery and equipment required in the daily airlines operations and civil
aviation business of the Group (“Existing Import and Export Agency
Agreement”).
On
29
April 2008, the Company entered into an agreement relating to the renewal
of the
Existing Import and Export Agency Agreement in substantially the same terms
for
a further term of 3 years, commencing from 1 July 2008 to 30 June 2011 (“Import
and Export Agency Renewal Agreement”).
Pricing
Under
the
Import and Export Agency Renewal Agreement, the Company shall pay commissions
and expenses to the Import & Export Company for the services it provides at
prescribed rates which are no less favourable than those offered by the Import
& Export Company to independent third parties.
The
rates
charged by the Import and Export Company pursuant to the Import and Export
Agency Renewal Agreement are comparable to those offered by independent third
parties to the Group, and are generally on no less favourable terms than
those
provided by independent third parties.
As
the
Import and Export Agency Agreement is a master agency agreement in nature,
its
payment terms are case specific, depending on the underlying subject
agreement.
Reasons
for and benefits of the transaction
The
Directors believe that the entering into of the Import and Export Agency
Renewal
Agreement will be beneficial to the Group and its business developments,
and in
turn is believed to be conducive to the interests of the Company’s
shareholders.
This
is
because the Import & Export Company is a PRC qualified company, licensed and
experienced in providing import and export agency services in respect of
aircraft and related aviation equipment and materials in the PRC. Compared
with
the few other independent third party service providers in the market, through
its cooperation with the Group for the last consecutive fourteen years, the
Import & Export Company has secured a better understanding of the Group’s
operations, as is evident from the proven track record it attains. Accordingly,
the Directors believe that the Import & Export Company will be able to
deliver timely services to accommodate the operating needs of the Group,
catering for its day-to-day business and administrative schedule. The Group
will
be able to benefit from, as is believed, better organised, efficient and
cost-effective import and export agency services required, at prescribed
rates
which are no less favourable than those offered by the Import & Export
Company to independent third parties.
Historical
figures
The
historical figures of the total commissions and expenses paid by the Group
to
the Import & Export Company for its agency services provided in respect of
each of the three financial years ended 31 December 2005, 2006 and 2007 are
approximately RMB40.59 million, RMB40.97 million and RMB34.64 million
respectively.
8
Annual
caps
Based
on
such historical figures, the expected expansion and developments of the Group’s
business and the extent and volume of import/export agency services the Group
expects the Import & Export Company to provide, the total amounts of
commissions and expenses payable by the Company to the Import & Export
Company for its provision of such services for the three financial years
ending
31 December 2008, 2009 and 2010 are not expected to exceed RMB42.70 million,
RMB45.00 million and RMB48.00 million respectively, taking into account the
anticipated gradual and organic growth of the Group’s business over these
years.
Listing
Rule implications
As
the
relevant applicable percentage ratios set out in the Listing Rules in respect
of
the Import and Export Agency Renewal Agreement is expected to be less than
2.5%
on an annual basis, such transaction falls within Rule 14A.34 of the Listing
Rules and are subject to the reporting and announcement requirements only
and is
exempted from the approval by Independent Shareholders under the Listing
Rules.
Maintenance
services
|
4.
|
Maintenance
Services Renewal
Agreement
|
The
Maintenance Company is a company located in Shanghai, which is principally
engaged in the businesses of providing maintenance, repair and overhaul services
in respect of aircraft and aviation equipment, and the manufacturing and
sale of
related equipment and materials.
On
12 May
2005, the Company entered into a maintenance services agreement with the
Maintenance Company, pursuant to which the Maintenance Company will from
time to
time provide the Group with comprehensive services in relation to maintenance,
repair and overhaul of aircraft and aviation equipment, and procurement of
related equipment and materials required in the daily operations of the Group
(“Existing Maintenance Services Agreement”).
On
29
April 2008, the Company entered into an agreement relating to the renewal
of the
Existing Maintenance Services Agreement in substantially the same terms for
a
further term of 3 years, commencing from 1 July 2008 to 30 June 2011
(“Maintenance Services Renewal Agreement”).
Pricing
Under
the
Maintenance Services Renewal Agreement, in relation to the provision of
maintenance and ancillary services, the service fees payable to the Maintenance
Company for its services shall be based on prevailing market rates available
from independent third-party service providers under comparable conditions.
Such
service fees shall be determined based on arm’s length negotiations, and shall
be no less favourable than those offered by the Maintenance Company to
independent third parties. Such service fees are payable quarterly in
arrears.
In
relation to procurement and supply of equipment and materials by the Maintenance
Company, the purchase price payable by the Company in respect of each specific
transaction, which will be documented in separate implementation agreement(s)
when occurred, shall be no less favourable than that offered by the Maintenance
Company to independent third parties.
9
The
rates
charged by the Maintenance Company pursuant to the Maintenance Services Renewal
Agreement are comparable to those offered by independent third parties to
the
Group, and are generally on no less favourable terms than those provided
by
independent third parties.
Reasons
for and benefits of the transaction
The
Directors believe that it is in the best interest of the Group to procure
the
required services and the supply of equipment and materials from the Maintenance
Company considering that the Maintenance Company has special strengths that
independent third-party service or other providers generally do not possess.
Such strengths include the aviation industry expertise, knowledge and
qualification of the Maintenance Company to meet the demand of certain types
of
work, its track record of quality and timely service available to the Group,
and
its convenient location, in the vicinity of certain local sites of the Group,
to
offer quick services.
Historical
figures
The
historical figures of the total amounts paid by the Group to the Maintenance
Company for each of the three financial years ended 31 December 2005, 2006
and
2007 are approximately RMB8.99 million, RMB11.30 million and RMB10.09 million
respectively.
Annual
caps
Based
on
such historical figures, and the expected expansion and developments of the
Group’s business, the total amounts payable by the Company to the Maintenance
Company under the Maintenance Services Renewal Agreement for the three financial
years ending 31 December 2008, 2009 and 2010 are not expected to exceed RMB16.00
million, RMB18.00 million and RMB20.00 million respectively, taking into
account
the anticipated gradual and organic growth of the Group’s business over these
years.
Listing
Rule implications
As
the
relevant applicable percentage ratios set out in the Listing Rules in respect
of
the Maintenance Services Renewal Agreement are expected to be less than 2.5%
on
an annual basis, such transactions falls within Rule 14A.34 of the Listing
Rules
and are subject to the reporting and announcement requirements only and is
exempted from the approval by the Independent Shareholders under the Listing
Rules.
Catering
services
|
5.
|
Catering
Services
Agreement
|
The
Holding Catering Company is the holding company whose subsidiaries are
principally engaged in the business of providing catering and related services
for airline companies, and have established operating centres at various
airports located in Anhui, Jiangxi, Jinan, Kunming, Ningbo, Qingdao, Shanghai,
Shanxi, Wuhan, Xi’an and Yantai.
10
On
12 May
2005, the Company entered into several catering services agreements with
the
Catering Companies respectively pursuant to which the Catering Companies
will
from time to time provide the Group with in-flight catering services (including
the supply of in-flight meals and beverages, cutlery and tableware) and related
storage and complementary services required in the daily airline operations
and
civil aviation business of the Group (“Catering Services”). The Catering
Companies provides their services in accordance with the specifications and
schedules as from time to time specified by the relevant member(s) of the
Group
to accommodate its operation needs (collectively the “Existing Catering Services
Agreements”).
On
29
April 2008, the Company entered into an agreement with the Holding Catering
Company, pursuant to which the subsidiaries of the Holding Catering Company
(each a “Catering Company” and collectively the “Catering Companies”) shall
provide the Catering Services in substantially the same terms as set out
in the
Existing Catering Services Agreements (“Catering Services
Agreement”).
Term
Subject
to the approval being obtained from the Independent Shareholders at the AGM,
the
Catering Services Agreement will be effective for a term of 3 years, commencing
from 1 July 2008 to 30 June 2011.
Pricing
Under
the
Catering Services Agreement, the service fees payable by the Company for
the
services provided shall be based on prevailing market rates available from
independent third-party service providers under comparable conditions. Such
service fees shall be determined based on arm’s length negotiations, and shall
be no less favourable than those offered by the respective Catering Company
to
independent third parties. Such service fees are payable monthly in arrears,
within 60 days of the receipt of invoices issued by the respective Catering
Company.
Reasons
for and benefits of the transaction
The
Directors believe that the entering into of the Catering Services Agreement
will
be beneficial to the Group and its business operations, and in turn is believed
to be conducive to the interests of the Company’s shareholders.
This
is
because each of the Catering Company is a company specialised in the provision
of catering and related services for airline companies, and more importantly
have local operating centres at various airports located in Anhui, Jiangxi,
Jinan, Kunming, Ningbo, Qingdao, Shanghai, Shanxi, Wuhan, Xi’an and Yantai,
covering the focal operating areas of the Group’s airlines and aviation
business. The Catering Companies have been providing catering services to
the
Group and will have a good understanding of the Group’s culture and operations.
The Catering Companies, through their operating centres, will therefore be
able
to provide fast and high-quality catering services in response to requirements,
normal or special, as may be specified from time to time by the relevant
member(s) of the Group to accommodate its day-to-day operation needs, and
to,
for example, cater for its different flight schedules (including regular,
chartered and temporary flights). Further, the various operating centres
of the
Catering Companies are equipped with advanced facilities and required
infrastructure for the provision of catering and related services, and are
believed to be able to provide reliable and efficient services.
11
Historical
figures
The
historical figures of the total service fees paid by the Group to the Catering
Companies for each of the three financial years ended 31 December 2005, 2006
and
2007 are approximately RMB231.89 million, RMB284.24 million and RMB330.56
million respectively.
Annual
caps
Based
on
such historical figures, and the expected expansion and developments of the
Group’s business, the total amounts of service fees payable by the Company under
the Catering Services Agreement for the three financial years ending 31 December
2008, 2009 and 2010 are not expected to exceed RMB469.90 million, RMB540.39
million and RMB621.49 million respectively, taking into account the anticipated
gradual and organic growth of the Group’s business over these
years.
Listing
Rules implications
As
the
relevant percentage ratio applicable to the Catering Services Agreement for
the
purpose of Chapter 14A of the Listing Rules is expected to be or likely to
exceed 2.5% on an annual basis, the transactions are expected to constitute
non-exempt continuing connected transactions of the Company under the Listing
Rules, and such transactions together with the associated annual caps will
be
subject to approval by the Independent Shareholders at the AGM.
Sales
agency services
|
6.
|
Sales
Agency Services Renewal
Agreements
|
The
Sales
Companies are companies principally engaged in the business of providing
agency
services in relation to sale of domestic and international air tickets and
complementary services such as tourism services (including hotel reservation
and
sale of souvenirs and other hospitality products). The Sales Companies have
established local operating centres in Shanghai, Xi’an, Kunming and other cities
and areas in China.
On
12 May
2005, the Company entered into several sales agency services agreements with
the
Sales Companies, pursuant to which the Sales Companies will from time to
time
provide the Group as its agents with services for sale of air tickets and
the
provision of complementary services required in the daily airline operations
and
civil aviation business of the Group (collectively “Existing Sales Agency
Agreements”).
On
29
April 2008, the Company entered into various renewal agreements relating
to the
renewal of the respective Existing Sales Agreements in substantially the
same
terms for a term of further 3 years, commencing from 1 July 2008 to 30 June
2011
(collectively “Sales Agency Renewal Agreements”).
Pricing
Under
the
Existing Sales Agreements, the Sales Companies charge commissions at a rate
by
reference to that prescribed by the Civil Aviation Administration of China
and
the International Aviation Transportation Association, as determined following
arm’s length negotiations. Such commissions are payable monthly in
arrears.
12
Reasons
for and benefits of the transaction
The
Company has always been focusing on enhancing its marketing and sales strategies
and efforts, and has been actively involved in the promotion and expansion
of
its sales network and market share. The Sales Companies, as mentioned above,
have local operating centres in Shanghai, Xi’an, Kunming and other cities and
areas in China, covering the focal operating areas of the Group’s airlines and
aviation business. All members of the Group will be able to obtain services
for
sale of air tickets and related complementary services at standard terms
and
rates prescribed by Civil Aviation Administration of China and the International
Aviation Transportation Association. The Directors therefore believe that
the
entering into of the Sales Agency Renewal Agreements will be beneficial to
the
Group and its business pursuits, and in turn is believed to be conducive
to the
interests of the Company’s shareholders.
Historical
figures
The
historical figures of the total commissions paid by the Group to the Sales
Companies for each of the three financial years ended 31 December 2005, 2006
and
2007 are approximately RMB29.22 million, RMB7.58 million and RMB9.23 million
respectively.
The
significant decrease in the total commission paid by the Group to the Sales
Companies during the financial year ended 31 December 2006 were mainly due
to:
(i) a shift by the Sales Companies in sourcing tickets from the International
Air Transport Association (IATA) instead of directly the Company; and (ii)
an
adjustment to the sales policy of the Company.
Annual
caps
Based
on
such historical figures, and the expected expansion and developments of the
Group’s business, the total amounts of commissions payable by the Company to the
Sales Companies under the Sales Agency Services Renewal Agreements for the
three
financial years ending 31 December 2008, 2009 and 2010 are not expected to
exceed RMB14.92 million, RMB17.15 million and RMB19.72 million respectively,
taking into account the anticipated gradual and organic growth of the Group’s
business over these years.
Listing
Rule implications
As
the
relevant applicable percentage ratios set out in the Listing Rules in respect
of
the Sales Agency Renewal Agreements are expected to be less than 2.5% on
an
annual basis, such transactions fall within Rule 14A.34 of the Listing Rules
and
are subject to the reporting and announcement requirements only and are exempted
from the approval by the Independent Shareholders under the Listing
Rules.
Advertising
services
|
7.
|
Advertising
Services Renewal
Agreement
|
The
Advertising Company is a company principally engaged in the businesses of
multi-media advertising operations, including advertising design and production,
and organising promotional functions and campaigns.
On
12 May
2005, the Company entered into an advertising services agreement with the
Advertising Company, pursuant to which the Advertising Company will from
time to
time provide the Group with multi-media advertising services to promote its
business and to organise promotional functions and campaigns to enhance its
reputation in the civil aviation industry (“Existing Advertising Services
Agreement”).
On
29
April 2008, the Company entered into a renewal agreement relating to the
renewal
of the Existing Advertising Services Agreement in substantially the same
terms
for a term of further 3 years, commencing from 1 July 2008 to 30 June 2011
(“Advertising Services Renewal Agreements”).
13
Pricing
Under
the
Advertising Services Renewal Agreement, the service fees payable to the
Advertising Company for its services provided shall be based on prevailing
market rates available from independent third-party service providers under
comparable conditions. Such service fees shall be determined based on arm’s
length negotiations, and shall be no less favourable than those offered by
the
Advertising Company to independent third parties.
At
the
beginning of each calendar year, the Company will pay the Advertising Company
a
lump sum representing its budgeted advertising expenses for that year, and
the
Advertising Company shall accordingly structure and carry out its advertising
functions for the Group, and shall offset its service fees from that sum
deposited by the Company on a quarterly basis in arrears.
Reasons
for and benefits of the transaction
The
Directors believe that the entering into of the Advertising Services Renewal
Agreement will be beneficial to the Group and its future business pursuits,
and
in turn is believed to be conducive to the interests of the Company’s
shareholders. This is because advertising businesses are not the core
competencies of the Group while the Advertising Company is experienced in
advertising operations and has a proven track record with an extensive network
of advertising sponsors to draw upon.
In
addition, compared with other independent third-party service providers,
the
Advertising Company has, through its cooperation with the Group for the last
consecutive fourteen years, secured a better understanding of the Group’s
culture and operations, and thus the advertising functions procured by the
Advertising Company for the Group would better fit and cater to its public
relations and marketing strategies. Further, the advertising functions of
all
members within the Group will be centrally organised by the Advertising Company,
which will, as is believed, be better managed and cost-effective.
Historical
figures
The
historical figures of the total service fees paid by the Group to the
Advertising Company for each of the three financial years ended 31 December
2005, 2006 and 2007 are approximately RMB8.61 million, RMB11.58 million and
RMB14.37 million, respectively.
Annual
caps
Based
on
such historical figures, and the expected expansion and developments of the
Group’s business, the total amounts of service fees payable by the Company to
the Advertising Company under the Advertising Services Renewal Agreement
for the
three financial years ending 31 December 2008, 2009 and 2010 are not expected
to
exceed RMB21.00 million, RMB23.50 million and RMB26.00 million, respectively,
taking into account the anticipated gradual and organic growth of the Group’s
business over these years.
14
Listing
Rule implications
As
the
relevant applicable percentage ratios set out in the Listing Rules in respect
of
the Advertising Services Renewal Agreement is expected to be less than 2.5%
on
an annual basis, such transactions falls within Rule 14A.34 of the Listing
Rules
and are subject to the reporting and announcement requirements only and is
exempted from the approval by the Independent Shareholders under the Listing
Rules.
Summary
of the Renewed Continuing Connected Transactions and the associated annual
caps
|
Annual
caps
For
the financial year ending
|
||||||||||
|
Transactions
|
31
December 2008
|
|
|
31
December 2009
|
|
|
31
December 2010
|
|||
|
Property
leasing
|
RMB60.00
million
|
RMB60.00
million
|
RMB60.00
million
|
|||||||
|
Financial
services
|
||||||||||
|
Deposit
and other financial services*
|
RMB2,500.00
million
|
RMB2,500.00
million
|
RMB2,500.00
million
|
|||||||
|
Import/export
agency services
|
RMB42.70
million
|
RMB45.00
million
|
RMB48.00
million
|
|||||||
|
Maintenance
services
|
RMB16.00
million
|
RMB18.00
million
|
RMB20.00
million
|
|||||||
|
Catering
services*
|
RMB469.90
million
|
RMB540.39
million
|
RMB621.49
million
|
|||||||
|
Sales
agency services
|
RMB14.92
million
|
RMB17.15
million
|
RMB19.72
million
|
|||||||
|
Advertising
services
|
RMB21.00
million
|
RMB23.50
million
|
RMB26.00
million
|
|||||||
* requires
Independent Shareholders’ approval at the AGM
In
respect of each of the Renewed Continuing Connected Transactions, the associated
annual cap represents the maximum aggregate annual value of consideration
payable under the relevant transaction (or the maximum daily outstanding
balance
of deposit with respect to the deposit pursuant to the Financial Services
Renewal Agreement as the case may be). If any annual cap for a transaction
is
exceeded, the Company will be required to re-comply with the applicable
connected transaction regulatory requirements under Chapter 14A of the Listing
Rules.
Implications
under the Listing Rules
Since
CEA
Holding is the controlling shareholder of the Company, each member of the
CEA
Holding Group is therefore a connected person of the Company.
Apart
from the Financial Services Transaction and the Catering Services Transaction,
the relevant percentage ratio applicable to the Renewed Continuing Connected
Transactions, for the purpose of Chapter 14A of the Listing Rules are expected
to be less than 2.5% on an annual basis, as such, such transactions falls
within
Rule 14A.34 of the Listing Rules and are subjected to the reporting and
announcement requirements only and are exempted from the approval by the
Independent Shareholders under the Listing Rules.
With
respect to the Financial Services Transaction and the Catering Services
Transaction, the relevant “percentage ratio” applicable to such transactions for
the purpose of Chapter 14A of the Listing Rules is expected to exceed 2.5%
on an
annual basis in the on-going performance of the agreement. The transactions
therefore constitutes non-exempt continuing connected transactions of the
Company under the Listing Rules, and such transactions together with the
associated annual caps will be subjected to approval by the Independent
Shareholders at the AGM. Furthermore, the Financial Services Transaction
also
constitutes a discloseable transaction pursuant to the Listing Rules and
are
accordingly subject to the relevant disclosure and reporting
requirements.
15
Based
on
the information described above, the Board is of the view that the Renewed
Continuing Connected Transactions are on normal commercial terms, in the
ordinary and usual course of business, fair and reasonable and in the interests
of the Group and the Company’s shareholders as a whole.
GENERAL
The
Company is principally engaged in the business of civil aviation.
As
mentioned above, because CEA Holding is the controlling shareholder of the
Company, each member of the CEA Holding Group is therefore a connected person
of
the Company.
CEA
Holding and its associate(s), if any, will at the AGM abstain from voting
on the
ordinary resolutions approving the Financial Services Transaction and the
Catering Services Transaction, and the associated annual caps, which will
be
taken on a poll as required under the Listing Rules.
The
Independent Board Committee will be established to advise the Independent
Shareholders in respect of the Financial Services Transaction and the Catering
Services Transaction, and the associated annual caps. An independent financial
adviser will be appointed to advise the Independent Board Committee and the
Independent Shareholders on the same.
A
circular containing further information in relation to the Financial Services
Transaction and the Catering Services Transaction as well as other related
matters, together with notice of the AGM, will be issued by the Company and
despatched to its shareholders as soon as practicable.
DEFINITIONS
In
this
announcement, unless the context otherwise requires, the following expressions
have the following meanings:
|
“AGM”
|
means
the 2007 annual general meeting of the Company;
|
|
“associate(s)”
|
has
the meaning ascribed thereto under the Listing Rules;
|
|
“Board”
|
means
the board of the Directors;
|
|
“CEA
Holding”
|
means
中國東方航空集團公司
(China
Eastern Air Holding Company), a wholly PRC state-owned enterprise
and the
controlling shareholder of the Company holding approximately 59.67%
of its
issued share capital;
|
|
“CEA
Holding Group”
|
means
CEA Holding and its subsidiaries and other associates, excluding
the
Group;
|
|
“CEA
Northwest”
|
means 中國東方航空西北公司
(China
Eastern Air Northwest Company), a company wholly-owned by CEA
Holding;
|
16
|
“CEA
Yunnan”
|
means 中國東方航空雲南公司
(China
Eastern Air Yunnan Company, a company wholly-owned by CEA
Holding;
|
|
“Catering
Services Transaction”
|
means
the transaction as described more particularly in the section headed
“Catering Services Agreement” which require the approval of the
Independent Shareholders at the AGM;
|
|
“Company”
|
means
中國東方航空股份有限公司
(China
Eastern Airlines Corporation Limited), a joint stock limited company
incorporated in the PRC with limited liability, whose H shares,
A shares
and American depositary shares are listed on the Stock Exchange,
the
Shanghai Stock Exchange and the New York Stock Exchange, Inc.,
respectively;
|
|
“connected
person(s)”
|
has
the meaning ascribed thereto under the Listing Rules;
|
|
“Continuing
Connected Transactions”
|
means
the continuing connected transactions of the Company with the CEA
Holding
Group as more particularly described in the announcement and circular
of
the Company dated 12 May 2005 and 19 May 2005
respectively;
|
|
“Directors”
|
means
the directors of the Company;
|
|
“Financial
Services Transaction”
|
means
the transaction as described more particularly in the section headed
“Financial Services Renewal Agreement” which requires the approval of the
Independent Shareholders at the AGM;
|
|
“Group”
|
means
the Company and its subsidiaries;
|
|
“HK$”
|
means
Hong Kong dollars, the lawful currency of Hong Kong;
|
|
“Hong
Kong”
|
means
Hong Kong Special Administrative Region of the People’s Republic of
China;
|
|
“Independent
Board Committee”
|
means
the independent board committee of the Company to be formed to
advise the
Independent Shareholders in relation to the Financial Service Transaction
and the Catering Service Transaction;
|
|
“Independent
Shareholders”
|
means
shareholders of the Company, other than CEA Holding and its associate(s),
if any;
|
|
“Listing
Rules”
|
means
the Rules Governing the Listing of Securities on The Stock Exchange
of
Hong Kong Limited;
|
|
“PRC”
|
means
the People’s Republic of China;
|
17
|
“Renewed
Continuing Connected Transaction”
|
means
the continuing connected transactions of the Company with the CEA
Holding
Group to be renewed as more particularly described in the sections
headed
“Property Leasing Renewal Agreement”, “Financial Services Renewal
Agreement”, “Import and Export Agency Renewal Agreement”, “Maintenance
Services Renewal Agreement”, “Catering Services Agreement”, “Sales Agency
Services Renewal Agreement” and “Advertising Services Renewal Agreement”
of this announcement;
|
|
“RMB”
|
means
Renminbi yuan, the lawful currency of the PRC;
|
|
“Stock
Exchange”
|
means
The Stock Exchange of Hong Kong Limited; and
|
|
“%”
|
means
per cent.
|
By
order
of the board of the directors of
CHINA
EASTERN AIRLINES CORPORATION LIMITED
Luo
Zhuping
Director
and Company Secretary
The
Company’s directors as at the date of this announcement are:
|
Li
Fenghua
|
(Chairman,
Non-executive Director)
|
|
Li
Jun
|
(Vice
Chairman, Non-executive Director)
|
|
Cao
Jianxiong
|
(President,
Executive Director)
|
|
Luo
Chaogeng
|
(Non-executive
Director)
|
|
Luo
Zhuping
|
(Executive
Director)
|
|
Hu
Honggao
|
(Independent
non-executive Director)
|
|
Peter
Lok
|
(Independent
non-executive Director)
|
|
Wu
Baiwang
|
(Independent
non-executive Director)
|
|
Zhou
Ruijin
|
(Independent
non-executive Director)
|
|
Xie
Rong
|
(Independent
non-executive Director)
|
Shanghai,
the PRC
29
April
2008
18