Cathay Pacific 1998 Annual Report Download - page 59

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CATHAY PACIFIC AIRWAYS LIMITED ANNUAL REPORT 1998
Notes to the Accounts – Directors and Employees / Related Party Transactions
28. Retirement benefits (continued)
The differences between the market values of the schemes’ assets and the present value of the accrued past
services liabilities at the date of an actuarial valuation are taken into consideration when determining future
funding levels in order to ensure that the schemes will be able to meet these liabilities as they become due.
Differences in assumed long-term average return on investments arise as a result of variances in past
performances of the individual funds.
(b) Defined contribution retirement scheme
Staff employed by the Company in Hong Kong on expatriate terms after 31st March 1993 are eligible to join a
defined contribution retirement scheme, the CPA Provident Fund 1993. Under the terms of this scheme, only
the Company is required to make contributions. During the year, the benefits forfeited in accordance with the
scheme’s rules amounted to HK$1.5 million (1997: HK$2.5 million) which have been applied towards the
contributions payable by the Company.
29. Related party transactions
Material transactions between the Group and associated companies and other related parties which were
carried out in the normal course of business on commercial terms are summarised below:
1998 1997
Associated Other Associated Other
Companies Related Parties Companies Related Parties
HK$M HK$M HK$M HK$M
Aircraft maintenance costs 854 361 1,006 248
Route operating costs 224 623 253 741
Dividends received (89) (22) (110) (43)
a) Other transactions with related parties.
i) Under an agreement between the two parties, the Company pays fees and reimburses costs to John Swire
& Sons Limited in exchange for services provided. Management services fees, calculated at 2.5% of the
Group’s profit before tax, results of associated companies, minority interests, and any profits and losses on
disposal of fixed assets and investments will be paid annually. No such service fee was paid for the year
ended 31st December 1998 (1997: HK$43 million) and expenses of HK$185 million (1997: HK$191 million)
were reimbursed at cost.
ii) During the year, a loan of HK$120 million was made to Hong Kong Aircraft Engineering Company Limited
which is unsecured, interest-bearing and repayable over 20 years. The interest rate was negotiated at arm’s
length after taking account of prevailing market conditions. The outstanding amount at the end of the year
was HK$119 million.
iii) A loan of HK$89 million was also made to Hong Kong Air Cargo Terminals Limited during the year. It is
unsecured and interest-bearing. The outstanding amount at the end of the year was HK$279 million.
iv) The Company received agency commission and services fees from Hong Kong Dragon Airlines Limited
(“Dragonair”). The services fees were received in respect of computer support, engineering, station and
ground services provided to Dragonair. All these transactions were conducted in the ordinary course of
business and on normal commercial terms. During the year, the Company entered into a novation
agreement with Dragonair under which Dragonair had the right to purchase one A330 aircraft from Airbus
Industrie. A total of HK$110 million was received from Dragonair for these transactions in 1998.