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