Cathay Pacific 2005 Annual Report Download - page 28

26 Cathay Pacific Airways Limited Annual Report 2005
Directors’ Report
(b) Pursuant to the amendments made during 2005
to the Cargo Capacity (Network Block Space)
Agreement (“BSA”) and Network Cargo Joint Sales
Agreement (“JSA”) both dated 6th December
1999, the Company provides cargo capacity for the
carriage of DHL’s air express materials between
Hong Kong and Beijing, Nagoya and Shanghai and
acts as the agent for DHL to sell reserved space
surplus to DHL’s requirements. Payment is made
in cash by DHL to the Company against invoice
presented at the end of each two-week period
within 21 days from the date of the invoice. The
term of the BSA and JSA (as amended) is from
6th March 2000 to 24th March 2007.
DHL is a connected person of the Company
because of its 40% attributable interest in the
Company’s subsidiary AHK. The transactions under
the BSA and JSA are continuing connected
transactions in respect of which an announcement
dated 19th April 2005 was published.
The fees and commissions payable by DHL to the
Company under the BSA and JSA totalled HK$285
million for the year ended 31st December 2005.
(c) Pursuant to an agreement dated 1st December
2004 (“JSSHK Services Agreement”) with JSSHK,
JSSHK provides services to the Company and its
subsidiaries. The services comprise advice and
expertise of the directors and senior officers of
the Swire group including (but not limited to)
assistance in negotiating with regulatory and other
governmental or official bodies, full or part time
services of members of the staff of the Swire
group, other administrative and similar services
and such other services as may be agreed from
time to time.
In return for these services, JSSHK receives annual
service fees calculated as 2.5% of the Company’s
consolidated profit before taxation and minority
interests after certain adjustments. The fees for
each year are payable in cash in arrears in two
instalments, an interim payment by the end of
October and a final payment by the end of April of
the following year, adjusted to take account of the
interim payment. The Company also reimburses
the Swire group for all the expenses incurred in
the provision of the services at cost.
The term of the JSSHK Services Agreement is
from 1st January 2005 to 31st December 2007
and is renewable for successive periods of three
years thereafter unless either party to it gives to
the other notice of termination of not less than
three months expiring on any 31st December.
Swire is the holding company of Swire Pacific
Limited which owns approximately 46% of the
issued capital of the Company and JSSHK, a
wholly owned subsidiary of Swire, is therefore a
connected person of the Company under the
Listing Rules. The transactions under the JSSHK
Services Agreement are continuing connected
transactions in respect of which an announcement
dated 1st December 2004 was published.
For the year ended 31st December 2005, the fees
payable by the Company to JSSHK under the
JSSHK Services Agreement totalled HK$101
million and expenses of HK$106 million were
reimbursed at cost.
(d) Pursuant to an agreement dated 31st May 2005
(“PCCW Services Agreement”) between Cathay
Pacific Loyalty Programmes Limited (“CPLP”)
with PCCW Teleservices (Hong Kong) Limited
(“Teleservices”), Teleservices provides services to
CPLP. The services comprise the provision of a
service centre and handling of customer calls and
related administration for the Company’s frequent
flyer and customer loyalty programmes. In return
for the services, CPLP pays to Teleservices a
monthly charge based on cost plus a margin.
Furthermore, Teleservices is paid additional
margins upon the achievement of certain
performance criteria and efficiency targets, and