Cathay Pacific 2011 Annual Report Download - page 41

Cathay Pacific Airways Limited Annual Report 2011 39
The current term of the Air China Framework
Agreement is for three years ending on 31st
December 2013 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.
Air China, by virtue of its 29.99% shareholding in
Cathay Pacific, is a substantial shareholder and
therefore a connected person of Cathay Pacific under
the Listing Rules. The transactions under the Air China
Framework Agreement are continuing connected
transactions in respect of which announcements
dated 26th June 2008 and 10th September 2010
were published.
For the year ended 31st December 2011 and under
the Air China Framework Agreement, the amounts
payable by the Group to Air China Group totalled
HK$356 million; and the amounts payable by Air China
Group to the Group totalled HK$287 million.
(d) Pursuant to a framework agreement dated 27th July
2010 (“HAESL Framework Agreement”) with Hong
Kong Aero Engine Services Limited (“HAESL”),
HAESL provides certain services to the Group in
connection with the overhaul and repair of aircraft
engines and components. Such services do not
include reimbursement of the cost of materials
purchased by HAESL from the engine supplier,
Rolls-Royce plc (or any of its group companies or
affiliates) for the Company. Payment is made in cash
by the Group to HAESL within 30 days upon receipt of
the invoice.
The current term of the HAESL Framework
Agreement is for three years ending on 31st
December 2012 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.
HAESL is a connected person of the Company by
virtue of it being an associate of the Company’s
substantial shareholder Swire Pacific. The transactions
under the HAESL Framework Agreement are
continuing connected transactions in respect of
which an announcement dated 27th July 2010
was published.
The fees payable by the Group to HAESL under the
HAESL Framework Agreement totalled HK$430
million for year ended 31st December 2011.
The independent non-executive Directors, who are not
interested in any connected transactions with the Group,
have reviewed and confirmed that the continuing
connected transactions as set out above have been
entered into by the Group:
(a) in the ordinary and usual course of business of
the Group;
(b) either on normal commercial terms or, if there are not
sufficient comparable transactions to judge whether
they are on normal commercial terms, on terms no
less favourable to the Group than terms available to or
from (as appropriate) independent third parties; and
(c) in accordance with the relevant agreement governing
them on terms that are fair and reasonable and in the
interests of the shareholders of the Company as
a whole.
The Auditors of the Company have also reviewed these
transactions and confirmed to the Board that:
(a) they have been approved by the Board of the
Company;
(b) they are in accordance with the pricing policies of the
Group (if the transactions involve provision of goods or
services by the Group);
(c) they have been entered into in accordance with the
relevant agreements governing the transactions; and
(d) they have not exceeded the relevant annual caps
disclosed in previous announcements.
Major customers and suppliers
6% of sales and 36% of purchases during the year were
attributable to the Group’s five largest customers and
suppliers respectively. 1% of sales were made to the
Group’s largest customer while 12% of purchases were
made from the Group’s largest supplier.
In respect of the Company’s purchases from PetroChina
International (Hong Kong) Corporation Limited, which was
among the Group’s five largest suppliers in 2011, Tung
Chee Chen was interested as a director of its holding
Directors’ Report