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36 Cathay Pacific Airways Limited Annual Report 2008
Directors’ Report
(b) Pursuant to an agreement (“JSSHK Services
Agreement”) dated 1st December 2004, as
amended and restated on 18th September 2008,
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, and in procuring
for the Company and its subsidiary, jointly
controlled and associated companies the use of
relevant trademarks owned by the Swire group.
No fee is payable in consideration of such
procuration obligation on such use.
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 at cost for all the expenses
incurred in the provision of the services.
The current term of the JSSHK Services
Agreement is from 1st January 2008 to 31st
December 2010 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
which owns approximately 40% 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 announcements
dated 1st December 2004 and 1st October 2007
were published.
For the year ended 31st December 2008, there
were no fees payable by the Company to JSSHK
under the JSSHK Services Agreement and
expenses of HK$138 million were reimbursed
at cost.
(c) Pursuant to an agreement dated 31st May 2005
(“Old Agreement”) and an agreement dated 29th
September 2008 (“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. Payment is made in cash by CPLP
within 45 days from the date of receipt of
Teleservices’ invoice. The term of the Old
Agreement was from 1st June 2005 to 30th
September 2008. The term of the PCCW Services
Agreement is from 1st October 2008 to 30th
September 2011.
Teleservices is an indirect wholly owned subsidiary
of PCCW Limited which indirectly holds a 37%
equity interest in the Company’s subsidiary Abacus
Distribution Systems (Hong Kong) Limited.
Teleservices is therefore a connected person of the
Company under the Listing Rules. The transactions
under the Old Agreement and the PCCW Services
Agreement are continuing connected transactions
in respect of which announcements dated 31st
May 2005, 21st April 2008, 25th July 2008 and
29th September 2008 were published.
The fees payable by CPLP to Teleservices under the
Old Agreement and the PCCW Services Agreement
totalled HK$83 million for the year ended 31st
December 2008.
(d) Pursuant to an agreement dated 26th February
2007 (“LHT Aircraft Maintenance Agreement”) with
Lufthansa Technik AG (“LHT”), a subsidiary of
Deutsche Lufthansa AG (“Lufthansa”), LHT
provides aircraft component overhaul services to
the Group. Payment is made in cash by the
Company to LHT within 30 days upon receipt of the
invoice. The term of the LHT Aircraft Maintenance
Agreement is for five years ending on 31st
December 2011. The LHT Aircraft Maintenance