Cathay Pacific 2015 Annual Report Download - page 34

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Cathay Pacific Airways Limited
32
Continuing connected transactions
During the year ended 31st December 2015, the Group had
the following continuing connected transactions, details of
which are set out below:
(a) 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
procuring for the Company and its subsidiary, joint
venture and associated companies the use of relevant
trademarks owned by the Swire group. No fee is payable
in consideration of such procuration obligation or
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 non-controlling
interests after certain adjustments. The fees for each
year are payable in cash in arrear 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 2014 to 31st December 2016 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 45% of the number of issued shares
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, 1st October
2007, 1st October 2010 and 14th November 2013
were published.
For the year ended 31st December 2015, the fees
payable by the Company to JSSHK under the JSSHK
Services Agreement totalled HK$143 million and
expenses of HK$209 million were reimbursed at cost.
(b) Pursuant to a framework agreement dated 13th
November 2013 (“HAECO Framework Agreement”) with
HAECO and HAECO ITM Limited (“HXITM”), services
(being maintenance and related services in respect of
aircraft, aircraft engines and aircraft parts and
components and including inventory technical
management services and the secondment of
personnel) are provided by HAECO and its subsidiaries
(“HAECO group”) to the Group and vice versa and by
HXITM to the HAECO group and vice versa. Payment is
made in cash within 30 days of receipt invoices. The term
of the HAECO Framework Agreement is for 10 years
ending on 31st December 2022.
HAECO and HXITM are connected persons of the
Company by virtue of them being subsidiaries of Swire
Pacific, one of the Company’s substantial shareholders.
The transactions under the HAECO Framework
Agreement are continuing connected transactions in
respect of which an announcement dated
13th November 2013 was published, a circular dated
3rd December 2013 was sent to shareholders and an
extraordinary general meeting of the Company was held
on 31st December 2013.
For the year ended 31st December 2015 and under the
HAECO Framework Agreement, the amounts payable by
the Group to the HAECO group totalled HK$3,246 million;
and the amounts payable by the HAECO group to the
Group totalled HK$27 million.
(c) The Company entered into a framework agreement
dated 26th June 2008 (“Air China Framework
Agreement”) with Air China Limited (“Air China”) in
respect of transactions between the Group on the one
hand and Air China and its subsidiaries (“Air China group”)
on the other hand arising from joint venture
arrangements for the operation of passenger air
transportation, code sharing arrangements, interline
arrangements, aircraft leasing, frequent flyer
programmes, the provision of airline catering, ground
support and engineering services and other services
agreed to be provided and other transactions agreed to
be undertaken under the Air China Framework
Agreement.
Directors’ Report