Cathay Pacific 2009 Annual Report Download - page 40

Directors’ Report
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 it 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 41.97% 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 2009, JSSHK
waived its entitlement to fees under the JSSHK
Services Agreement in respect of that part of the
Company’s adjusted consolidated profit before
taxation and minority interests which was referable
to the sale by the Company to Swire Pacific of
20,700,958 shares in HAECO. After taking account
of that waiver, the fees payable by the Company to
JSSHK under the JSSHK Services Agreement were
HK$95 million. Expenses of HK$161 million were
reimbursed at cost.
(c) Pursuant to 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 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 PCCW Services Agreement are
continuing connected transactions in respect of
which an announcement dated 29th September
2008 was published.
The fees payable by CPLP to Teleservices under the
PCCW Services Agreement totalled HK$83 million
for the year ended 31st December 2009.
(d) Pursuant to a framework agreement dated 21st
May 2007 (“HAECO Framework Agreement”) with
HAECO, HAECO and its subsidiaries (“HAECO
group”) provide services to the Group’s aircraft
fleets. The services include line maintenance, base
maintenance, comprehensive stores and logistics
support, component and avionics overhaul, material
supply, engineering services and ancillary services
at Hong Kong International Airport, Xiamen or other
airports. Payment is made in cash by the Group to
HAECO group within 30 days upon receipt of the
invoice. The term of the HAECO Framework
Agreement is for 10 years ending on 31st
December 2016.
HAECO 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 HAECO Framework
Agreement are continuing connected transactions
in respect of which an announcement dated
21st May 2007 was published and a circular
dated 31st May 2007 was sent to shareholders.
The fees payable by the Group to HAECO group
under the HAECO Framework Agreement totalled
HK$1,891 million for the year ended 31st
December 2009.
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