Cathay Pacific 2008 Annual Report Download - page 37

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Cathay Pacific Airways Limited Annual Report 2008 35
Directors’ Report
Commitments and contingencies
The details of capital commitments and contingent
liabilities of the Group and the Company as at 31st
December 2008 are set out in note 30 to the accounts.
Agreement for services
The Company has an agreement for services with
John Swire & Sons (H.K.) Limited (“JSSHK”), the
particulars of which are set out in the section on
continuing connected transactions.
As directors and/or employees of the John Swire &
Sons Limited (“Swire”) group, Christopher Pratt,
Robert Atkinson, Philip Chen, Martin Cubbon, James
E. Hughes-Hallett, James W.J. Hughes-Hallett, John
Slosar, Tony Tyler and Robert Woods are interested in
the JSSHK Services Agreement (as defined below).
Particulars of the fees paid and the expenses
reimbursed for the year ended 31st December 2008
are set out below and also given in note 29 to the
accounts.
Significant contracts
Contracts between the Group and HAECO and its
subsidiary TAECO for the maintenance and overhaul of
aircraft and related equipment accounted for
approximately 2% of the Group’s operating expenses
in 2008. Like the Company, HAECO is an associate of
Swire Pacific; all contracts have been concluded on
normal commercial terms in the ordinary course of the
business of both parties.
Connected transaction
Caterwell One (Netherlands) B.V. (“Caterwell”), a
wholly owned subsidiary of the Company, entered into
a sale and purchase agreement with LSG Lufthansa
Service Europa / Afrika GmbH (“LSG”) on 22nd July
2008 for the sale by Caterwell of a 30% shareholding
in CLS Catering Services Limited (“CLS”) to LSG for a
cash consideration of CAD5.55 million at completion.
As LSG was a substantial shareholder of CLS which
was a subsidiary of the Company, LSG was a
connected person of the Company and the transaction
under the sale and purchase agreement constituted a
connected transaction for the Company, in respect of
which an announcement dated 22nd July 2008 was
published. With effect from 22nd July 2008, the
Company’s attributable interest in CLS decreased from
60% to 30%; LSG’s attributable interest in CLS
increased from 40% to 70%; CLS ceased to be a
subsidiary of the Company; and LSG and its associates
ceased to be connected persons of the Company.
Continuing connected transactions
During the year ended 31st December 2008, the
Group had the following continuing connected
transactions, details of which are set out below:
(a) Pursuant to an agreement dated 17th October 2002
(the “DHL Services Agreement”) with DHL
International GmbH (formerly DHL International
Limited) (“DHL”), AHK provides to DHL services in
respect of the sale of space on certain cargo
services operated by AHK in the Asian region for
the carriage of DHL’s door to door air express
materials. Payment is made in cash by DHL to AHK
against invoice presented monthly within 30 days
from the date of receipt of the invoice. The term of
the DHL Services Agreement is from 17th October
2002 to 31st December 2018.
DHL is a connected person of the Company
because its holding company Deutsche Post AG
holds a 40% attributable interest in the Company’s
subsidiary AHK. The transactions under the DHL
Services Agreement are continuing connected
transactions in respect of which announcements
dated 17th October 2002, 27th June 2005 and 12th
March 2007 were published and circulars dated
12th July 2005 and 21st March 2007 were sent to
shareholders.
The fees payable by DHL to AHK under the DHL
Services Agreement totalled HK$2,122 million for
the year ended 31st December 2008.