Cathay Pacific 2006 Annual Report Download - page 84

Cathay Pacific Airways Limited Annual Report 2006
82
26. Related party transactions
(a) Material transactions between the Group and associates and other related parties which were carried out in
the normal course of business on commercial terms are summarised below:
2006 2005
Associates
HK$M
Other related
parties
HK$M
Associates
HK$M
Other related
parties
HK$M
Turnover 207 – 103 –
Aircraft maintenance costs 1,057 – 967 –
Route operating costs 226 – 183 –
Dividends received (241) – (170) –
Fixed assets purchase 1 – 5 –
(b) Other transactions with related parties
(i) The Company had an agreement for services with JSSHK (“JSSHK Services Agreement”). Under the
JSSHK Services Agreement, the Company paid fees and reimbursed costs to JSSHK in exchange for
services provided. Service fees calculated at 2.5% of the Group’s profit before tax, results of associates,
minority interests, and any profits and losses on disposal of fixed assets were paid annually. Service fees
paid for the year ended 31st December 2006 were HK$125 million (2005: HK$101 million) and expenses
of HK$124 million (2005: HK$106 million) were reimbursed at cost; in addition, HK$50 million
(2005: HK$47 million) in respect of shared administrative services were reimbursed.
Transactions under the JSSHK Services Agreement are continuing connected transactions, in respect of
which the Company has complied with the disclosure requirements in accordance with Chapter 14A of the
Listing Rules. For definition of terms, please refer to Directors’ Report on page 31.
(ii) Under the HAECO Services Agreements with HAECO, the Company paid fees to HAECO in exchange for
maintenance services provided to the Company’s aircraft fleet. Service fees paid to HAECO for the year
ended 31st December 2006 were HK$941 million (2005: HK$949 million).
Transactions under the HAECO Services Agreements are continuing connected transactions, in respect
of which the Company has complied with the disclosure and shareholders’ approval requirements in
accordance with Chapter 14A of the Listing Rules. For definition of terms, please refer to Directors’ Report
on page 32.
(iii) The Company received agency commission and service fees from Dragonair as a related party for the
period from 1st January to 28th September 2006, on which date Dragonair became a wholly owned
subsidiary of the Company. Service 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. A total of HK$163 million was received from
Dragonair for these transactions during the period from 1st January to 28th September 2006 (2005:
HK$215 million). Dragonair is also a partner of the Asia Miles frequent-flyer programme.
(iv) The acquisition of 38,551,808 Dragonair shares from Swire Pacific, the acquisition of 142,482,484
Dragonair shares from CITIC Pacific, the allotment of 51,402,411 new shares of the Company to
Swire Pacific, and the allotment of 189,976,645 new shares of the Company to CITIC Pacific under the
Restructuring Agreement constituted connected transactions, in respect of which the Company has
complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules. For
definition of terms and further details, please refer to Directors’ Report on page 30.
(c) Amounts due from and due to associates and other related companies at 31st December 2006 are disclosed
in notes 16 and 18 to the accounts. These balances arising in the normal course of business are non-interest
bearing and have no fixed repayment terms.
Notes to the Accounts Related Party Transactions