Cathay Pacific 2010 Annual Report Download - page 41

Cathay Pacific Airways Limited Annual Report 2010
39
For the year ended 31st December 2010 and under
the Air China Framework Agreement, the amounts
payable by the Group to Air China Group totalled
HK$403 million; and the amounts payable by Air China
Group to the Group totalled HK$219 million.
(f) Pursuant to a framework agreement dated 27th July
2010 (“HAESL Framework Agreement”) with Hong
Kong Aero Engine Services Limited (“HAESL”), HAESL
provides certain services to the Group in connection
with the overhaul and repair of aircraft engines and
components. Such services do not include
reimbursement of the cost of materials purchased by
HAESL from the engine supplier, Rolls-Royce plc (or
any of its group companies or affiliates) for the
Company. Payment is made in cash by the Group to
HAESL within 30 days upon receipt of the invoice.
The current term of the HAESL Framework
Agreement is for 3 years ending on 31st December
2012 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.
On 7th June 2010, HAECO, which holds a 45%
shareholding in HAESL, became a subsidiary of Swire
Pacific and as a result HAESL became an associate of
Swire Pacific under the Listing Rules. As Swire Pacific
is a substantial shareholder of the Company under the
Listing Rules, HAESL became a connected person of
the Company under the Listing Rules by becoming an
associate of a substantial shareholder of the
Company. As a result, the transactions under the
HAESL Framework Agreement became continuing
connected transactions in respect of which an
announcement dated 27th July 2010 was published.
The fees payable by the Group to HAESL under the
HAESL Framework Agreement totalled HK$228
million for period from 7th June 2010 to 31st
December 2010.
The independent non-executive Directors, who are not
interested in any connected transactions with the Group,
have reviewed and confirmed that the continuing
connected transactions as set out above have been
entered into by the Group:
(a) in the ordinary and usual course of business of
the Group;
(b) either on normal commercial terms or, if there are not
sufficient comparable transactions to judge whether
they are on normal commercial terms, on terms no
less favourable to the Group than terms available to or
from (as appropriate) independent third parties; and
(c) in accordance with the relevant agreement
governing them on terms that are fair and
reasonable and in the interests of the shareholders
of the Company as a whole.
The Auditors of the Company have also reviewed these
transactions and confirmed to the Board that:
(a) they have been approved by the Board of the
Company;
(b) they are in accordance with the pricing policies of the
Group (if the transactions involve provision of goods or
services by the Group);
(c) they have been entered into in accordance with the
relevant agreements governing the transactions; and
(d) they have not exceeded the relevant annual caps
disclosed in previous announcements.
Major customers and suppliers
6% of sales and 33% of purchases during the year were
attributable to the Group’s five largest customers and
suppliers respectively. 1% of sales were made to the
Group’s largest customer while 10% of purchases were
made from the Group’s largest supplier.
In respect of the Company’s purchases from PetroChina
International (Hong Kong) Corporation Limited, which was
among the Group’s five largest suppliers in 2010, Tung
Chee Chen is interested as a director of its holding
company, PetroChina Company Limited. Save as
disclosed in this paragraph, no Director, any of their
associates or any shareholder who, to the knowledge of
the Directors, owns more than 5% of the Company’s
issued share capital has an interest in the Group’s five
largest suppliers.
Directors’ Report