Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
(A joint stock limited company incorporated in the People’s Republic of China with limited liability)
(Stock Code: 00696)
CONTINUING CONNECTED TRANSACTIONS: HEBEI AIRLINES AGREEMENT AND JIANGXI AIRLINES AGREEMENT Reference is made to the announcement of the Company dated 19 November 2014, in relation to, among other things, the Hebei Airlines Agreement entered into between the Company and Hebei Airlines in August 2010 and renewed thereafter from time to time. Southern Airlines acquired Hebei Airlines in October 2014, and the continuing transactions between Hebei Airlines and the Company constituted connected transactions of the Company thereafter. As such, the Company published a Rule 14A.60 announcement in connection with the Hebei Airlines Agreement on 19 November 2014. As the Hebei Airlines Agreement will expire on 31 December 2016, the Company and Hebei Airlines entered into a supplemental agreement on 5 December 2016 to extend the term of the Hebei Airlines Agreement from 1 January 2017 to 31 December 2019. Jiangxi Airlines, a subsidiary of Southern Airlines, was established in December 2015 and the Company entered into the Jiangxi Airlines Agreement with Jiangxi Airlines thereafter for a term from 1 December 2015 to 31 December 2019. Pursuant to the Jiangxi Airlines Agreement, the Company will provide certain technology services to Jiangxi Airlines thereunder. At the time of entering into the Jiangxi Airlines Agreement, the Company estimated that the annual transaction amount for the term of the Jiangxi Airlines Agreement will be comparatively small and fall into the de minimis transaction under Chapter 14A of the Listing Rules. However, based on Jiangxi Airlines’ current business development plan, it is expected that the technology cooperation between the Company and Jiangxi Airlines will be strengthened, which in turn will increase the aforesaid transaction amounts. Taking this into account, the Company re-estimated that the transaction amount for each of the three years ending 31 December 2019 under the Jiangxi Airlines Agreement will increase significantly. As such, on 5 December 2016, the Company set up the proposed annual caps for the three years ending 31 December 2019 accordingly to regulate the transactions under the Jiangxi Airlines Agreement. Since Hebei Airlines and Jiangxi Airlines are connected persons of the Company under the Listing Rules, the transactions contemplated under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement are continuing connected transactions of the Company under the Listing Rules.
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Since the highest applicable Percentage Ratio calculated with reference to the largest proposed annual cap for the transactions under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement on an aggregate basis is more than 0.1% but less than 5%, the transactions contemplated thereunder and the relevant annual caps are subject to the announcement and annual review requirements but exempt from the independent shareholders’ approval requirement of Chapter 14A of the Listing Rules. I.
BACKGROUND Reference is made to the announcement of the Company dated 19 November 2014, in relation to, among other things, the Hebei Airlines Agreement entered into between the Company and Hebei Airlines in August 2010 and renewed thereafter from time to time. Southern Airlines acquired Hebei Airlines in October 2014, and the continuing transactions between Hebei Airlines and the Company constituted connected transactions of the Company thereafter. As such, the Company published a Rule 14A.60 announcement in connection with the Hebei Airlines Agreement on 19 November 2014. As the Hebei Airlines Agreement will expire on 31 December 2016, the Company and Hebei Airlines entered into a supplemental agreement on 5 December 2016 to extend the term of the Hebei Airlines Agreement from 1 January 2017 to 31 December 2019. Jiangxi Airlines, a subsidiary of Southern Airlines, was established in December 2015 and the Company entered into the Jiangxi Airlines Agreement with Jiangxi Airlines thereafter for a term from 1 December 2015 to 31 December 2019. Pursuant to the Jiangxi Airlines Agreement, the Company will provide certain technology services to Jiangxi Airlines thereunder. At the time of entering into the Jiangxi Airlines Agreement, the Company estimated that the annual transaction amount for the term of the Jiangxi Airlines Agreement will be comparatively small and fall into the de minimis transaction under Chapter 14A of the Listing Rules. However, based on Jiangxi Airlines’ current business development plan, it is expected that the technology cooperation between the Company and Jiangxi Airlines will be strengthened, which in turn will increase the aforesaid transaction amounts. Taking this into account, the Company re-estimated that the transaction amount for each of the three years ending 31 December 2019 under the Jiangxi Airlines Agreement will increase significantly. As such, on 5 December 2016, the Company set up the proposed annual caps for the three years ending 31 December 2019 accordingly to regulate the transactions under the Jiangxi Airlines Agreement.
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II.
CONTINUING CONNECTED TRANSACTIONS UNDER HEBEI AIRLINES AGREEMENT AND JIANGXI AIRLINES AGREEMENT Details of the continuing connected transactions under the Hebei Airlines Agreement are summarized as follows: Parties:
Service provider: The Company Service recipient: Hebei Airlines
Date:
30 August 2010 (as renewed on 7 April 2013 and 5 December 2016)
Term:
1 July 2010 to 31 December 2019
Services:
The scope of technology services provided by the Company to Hebei Airlines under the Hebei Airlines Agreement consists of the following: (i)
flight control system services which include, among others, the provision of consolidated information, flight information, flight control, flight tickets sales, automatic tickets sales and announcement of freight price;
(ii)
computer distribution system services which include, among others, the provision of flight information display, real-time flight reservation, automatic tickets sales, tickets price display and other travelrelated services;
(iii) reservation system extended services and departure system services, which include the provision of check-in, boarding and load planning services; and (iv) civil aviation and commercial data network services which include, among others, the provision of network transmission services and connection services.
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Service fees:
The fees for the technology services are as follows: The “flight control system services” as mentioned in (i) above and the “computer distribution system services” as mentioned in (ii) above are generally referred to as the “airlines passenger booking system services”. The pricing of the airlines passenger booking system services is subject to the maximum guidance prices prescribed by CAAC, being the progressive per segment booking fee ranging from RMB4.5 to RMB6.5 for domestic flights and RMB6.5 to RMB7 for international flights (depending on the monthly booking volume). The Company may also determine the actual prices for airlines passenger booking system services through arm’s length negotiation with Hebei Airlines, having taken into account its booking volume, and in any event the prices shall not exceed the above maximum guidance prices prescribed by CAAC. The pricing of the “reservation system extended services and departure system services” as mentioned in (iii) above is also subject to the maximum guidance prices prescribed by CAAC, being (a) RMB7 per segment for international and regional flights and RMB4 per segment for domestic flights; and (b) RMB500 per aircraft for load balancing services. The Company may also determine the actual prices for reservation system extended services and departure system services through arm’s length negotiation with Hebei Airlines, having taken into account a number of factors such as types of the flights, transportation volume, level of services and size of the aircraft, and in any event the prices shall not exceed the above maximum guidance prices prescribed by CAAC. For the services as mentioned in (i), (ii) and (iii) above, the maximum fee shall not be more than RMB9.9 per segment when charged on an aggregate basis.
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The pricing of physical identified device (“PID”) connection and maintenance services under the aforementioned type (iv) the “civil aviation and commercial data network services” is determined with reference to the guidance price prescribed by CAAC of RMB200 per PID per month. The pricing of other types of services under the aforementioned type (iv) the “civil aviation and commercial data network services” (other than PID connection and maintenance services) is not governed by the guidelines of CAAC or the framework of any other PRC airlines regulatory body but is subject to reasonable mutual negotiation between the parties and with reference to market conditions after taking into account factors including but not limited to: (i) the costs of provision of such products or services; (ii) the processing volume and complexity of such products or services; and (iii) the price quoted by at least two independent third parties providing products or services of similar nature if available. The service fees shall be calculated on a monthly basis and shall be paid within 30 days after receipt of the invoice by cash. The Directors are of the view that the basis of determination of the service fees mentioned above is fair and reasonable. The principal terms of the Jiangxi Airlines Agreement are the same to the Hebei Airlines Agreement as disclosed above. III. HISTORICAL TRANSACTION AMOUNTS Set out below is a summary of the historical transaction amounts of the continuing connected transactions under the Hebei Airlines Agreement:
Continuing connected transaction under the Hebei Airlines Agreement
Year ended 31 December 2014 (After being acquired by Southern Airlines) RMB’000
Year ended 31 December 2015 RMB’000
Eight months ended 31 August 2016 RMB’000 (unaudited)
4,870.81 (equivalent to approximately HK$5,601,432)
21,455.02 (equivalent to approximately HK$24,673,273)
17,280 (equivalent to approximately HK$19,872,000)
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The unaudited historical transaction amount of the continuing connected transaction under the Jiangxi Airlines Agreement for the eight months ended 31 August 2016 is approximately RMB3,090,000 (equivalent to approximately HK$3,553,500). It is expected that the transaction amount between the Company and Jiangxi Airlines under the Jiangxi Airlines Agreement for the year 2016 will fall into the de minimis transaction under Chapter 14A of the Listing Rules. IV. PROPOSED ANNUAL CAPS AND BASIS FOR THE PROPOSED ANNUAL CAPS Proposed Annual Caps for the Continuing Connected Transaction under the Hebei Airlines Agreement Set out below is a summary of the proposed annual caps for the continuing connected transaction under the Hebei Airlines Agreement for the three years ending 31 December 2019: Years ending 31 December 2017 2018 RMB’000 RMB’000 28,253 (equivalent to approximately HK$32,490,950)
30,796 (equivalent to approximately HK$35,415,400)
2019 RMB’000 33,567 (equivalent to approximately HK$38,602,050)
The proposed annual caps for the continuing connected transaction under the Hebei Airlines Agreement for the three years ending 31 December 2019 represent an estimated annual growth rate of 9% in the transaction volume, which are determined with reference to (i) the historical transaction amounts of such type of transactions between the Group and Hebei Airlines for the preceding two years ended 31 December 2015 and the eight months ended 31 August 2016; (ii) the actual growth rate of approximately 10.8% of the PRC’s gross passenger transportation volume for the first half of 2016 as compared with the corresponding period in the previous year; (iii) the average yearly increment of at least 10% of the PRC’s gross passenger transportation volume from 2016 to 2020 as estimated by the Company based on the publicly available information of CAAC; (iv) the increasing demand of the civil aviation transportation market as influenced by various factors such as the “One Belt and One Road” strategy; and (v) the expansion of Hebei Airlines’ businesses from time to time through establishing more branches.
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Proposed Annual Caps for the Continuing Connected Transaction under the Jiangxi Airlines Agreement Set out below is a summary of the proposed annual caps for the continuing connected transaction under the Jiangxi Airlines Agreement for the three years ending 31 December 2019: Years ending 31 December 2017 2018 RMB’000 RMB’000 8,100 (equivalent to approximately HK$9,315,000)
12,150 (equivalent to approximately HK$13,972,500)
2019 RMB’000 18,225 (equivalent to approximately HK$20,958,750)
The proposed annual caps for the continuing connected transaction under the Jiangxi Airlines Agreement for the three years ending 31 December 2019 represent an estimated annual growth rate of 50% in the transaction volume, which are determined with reference to (i) the significant expansion of Jiangxi Airlines’ business in the upcoming few years as a newly-established airline company; (ii) the actual growth rate of approximately 10.8% of the PRC’s gross passenger transportation volume for the first half of 2016 as compared with the corresponding period in the previous year; (iii) the average yearly increment of at least 10% of the PRC’s gross passenger transportation volume from 2016 to 2020 as estimated by the Company based on the publicly available information of CAAC; and (iv) the increasing demand of the civil aviation transportation market as influenced by various factors such as the “One Belt and One Road” strategy. V.
REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS The provision of the various technology services under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement by the Group to Hebei Airlines and Jiangxi Airlines respectively is in the ordinary and usual course of business of the Group. The Group will receive service fees for provision of such services under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement and thus such transactions contemplated thereunder will increase the total revenue of the Group. The Directors (including the independent non-executive Directors) are of the view that the transactions under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement are conducted in the ordinary and usual course of business of the Group and are on normal commercial terms, and the terms of such transactions and the proposed annual caps thereof are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
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VI. IMPLICATIONS UNDER THE LISTING RULES As at the date of the announcement, Hebei Airlines is a subsidiary of Xiamen Airlines. Xiamen Airlines is a subsidiary of Southern Airlines, and Southern Airlines is a subsidiary of Southern Holding, a substantial shareholder of the Company. Hebei Airlines is therefore a connected person of the Company under the Listing Rules. As at the date of the announcement, Jiangxi Airlines is owned as to 60% by Xiamen Airlines and 40% by Jiangxi Airlines Investment Company Limited* (江西航空投資有 限公司). Xiamen Airlines is a subsidiary of Southern Airlines, and Southern Airlines is a subsidiary of Southern Holding, a substantial shareholder of the Company. Jiangxi Airlines is therefore a connected person of the Company under the Listing Rules. Since the highest applicable Percentage Ratio calculated with reference to the largest proposed annual cap for the transactions under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement on an aggregate basis is more than 0.1% but less than 5%, the transactions contemplated thereunder and the relevant annual caps are subject to the announcement and annual review requirements but exempt from the independent shareholders’ approval requirement of Chapter 14A of the Listing Rules. Mr. Yuan Xin’an has abstained from voting on relevant resolutions in respect of the continuing connected transactions and the relevant proposed annual caps under the Hebei Airlines Agreement and the Jiangxi Airlines Agreement as he is a director of Southern Airlines and an employee of Southern Holding. Save as disclosed above, none of the Directors has a material interest in the aforementioned transactions and none of them has abstained from voting on the relevant Board resolutions. VII. GENERAL INFORMATION Information on the Group The Group is principally engaged in the provision of aviation information technology services in the PRC as well as provision of accounting, settlement and clearing services and information system development and support services to domestic and worldwide airline companies. Information on Hebei Airlines Hebei Airlines is principally engaged in airline operation in the PRC. Information on Jiangxi Airlines Jiangxi Airlines is principally engaged in airline operation in the PRC.
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VIII. DEFINITIONS In this announcement, the following expressions shall have the meaning set out below unless the context requires otherwise: “Board”
the board of Directors
“CAAC”
中國民用航空局 (Civil Aviation Administration of China), the administrative authority in the civil aviation industry in the PRC
“Company”
TravelSky Technology Limited, a company incorporated under the laws of the PRC whose shares are listed on the Main Board of the Stock Exchange and whose American depositary shares are traded on the over-the-counter market in the United States of America
“connected person(s)”
has the same meaning as ascribed to it under the Listing Rules
“Director(s)”
the director(s) of the Company
“Group”
the Company and its subsidiaries
“Hebei Airlines”
河北航空有限公司 (Hebei Airlines Company Limited*), a limited liability company incorporated in the PRC
“Hebei Airlines Agreement”
the agreement entered into between the Company and Hebei Airlines on 30 August 2010 in relation to the provision of technology services by the Company to Hebei Airlines, which was renewed on 7 April 2013 and 5 December 2016 for a period up to 31 December 2019 as renewed by both parties from time to time
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong Special Administrative Region
“Jiangxi Airlines”
江西航空有限公司 (Jiangxi Airlines Company Limited*), a limited liability company incorporated in the PRC
“Jiangxi Airlines Agreement”
the agreement entered into between the Company and Jiangxi Airlines on 1 December 2015 in relation to the provision of technology services by the Company to Jiangxi Airlines for a period up to 31 December 2019
“Listing Rules”
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
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*
“Percentage Ratio”
the percentage ratio described under Rule 14.07 of the Listing Rules
“PRC”
the People’s Republic of China and, for the purpose of this announcement, excludes the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan
“RMB”
Renminbi, the lawful currency of the PRC
“Shareholder(s)”
the shareholders of the Company
“Southern Airlines”
中國南方航空股份有限公司 ( C h i n a S o u t h e r n A i r l i n e s Company Limited*), a subsidiary of Southern Holding as at the date of this announcement
“Southern Holding”
中國南方航空集團公司 ( C h i n a S o u t h e r n A i r H o l d i n g Company*), a substantial shareholder of the Company as at the date of this announcement
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subsidiary”
has the same meaning ascribed to it under the Listing Rules
“Xiamen Airlines”
廈門航空有限公司 (Xiamen Airlines Company Limited*), a limited liability company incorporated in the PRC
“%”
per cent
for identification purposes only
For the purpose of this announcement, unless otherwise indicated, the exchange rate at RMB1 = HK$1.15 has been used, where applicable, for the purpose of illustration only and not constitute a representation that any amount have been, could have been or may be exchanged. By the order of the Board TravelSky Technology Limited Cui Zhixiong Chairman Beijing, the PRC 5 December 2016
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As at the date of this announcement, the Board comprises: Executive Directors:
Mr. Cui Zhixiong (Chairman) and Mr. Xiao Yinhong;
Non-executive Directors:
Mr. Cao Jianxiong, Mr. Li Yangmin and Mr. Yuan Xin’an;
Independent non-executive Directors:
Mr. Cao Shiqing, Dr. Ngai Wai Fung and Mr. Liu Xiangqun.
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