The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this
announcement, makes no representation as to its accuracy or completeness and expressly
disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon
the whole or any part of the contents of this announcement.
CATHAY PACIFIC AIRWAYS LIMITED
(Incorporated in Hong Kong with limited liability)
Continuing Connected Transactions With DHL International Limited
On 17th October 2002, AHK entered into an agreement (the “Services Agreement”) with DHL
under which AHK will provide the Services to DHL.
On the same date, Cathay Pacific and AHK entered into another agreement (the “Agency
Agreement”) with DHL under which, for the space not taken up by DHL, Cathay Pacific will
act as AHK’s worldwide exclusive sales agent for general cargo sales and for arranging and
marketing AHK’s commercial activities.
The Transactions are to take place on a continuing basis. Under the Listing Rules, such
transactions will constitute continuing connected transactions of Cathay Pacific because of
DHL Worldwide Express’ 30% interest in AHK.
The Directors expect that the yearly aggregate of the fees payable by DHL to AHK and by
AHK to Cathay Pacific under the above two agreements will exceed 0.03% but be below 3%
of the net tangible assets of the Group. Cathay Pacific has applied to the Stock Exchange for a
waiver from strict compliance with the disclosure requirements under Chapter 14 of the
Listing Rules. Details of the Transactions will be included in Cathay Pacific’s future
published annual report and accounts.
Agreement dated 17th October 2002 for Services to DHL
Parties: AHK and DHL
AHK will provide the Services to DHL from 17th October 2002 until 31st December 2018, with an
option exercisable by DHL to extend beyond 31st December 2018 for a period agreed by the parties.
The agreement may be terminated before expiration of the full term in certain circumstances,
including upon material default by a party and continuing force majeure.
DHL express material will be given priority on those airline services which are provided to DHL by
AHK. Space not taken up by DHL on those services will be available for AHK to sell to its other
customers. DHL will compensate AHK to the extent space reserved for it is not occupied.
Agreement dated 17th October 2002 for general sales services
Parties: Cathay Pacific, AHK and DHL
Cathay Pacific will act as worldwide exclusive sales agent for general cargo sales on all the flights
operated by AHK, including those airline services which are provided to DHL where DHL does not
take up all space reserved for it.
Cathay Pacific shall be paid commissions by AHK for acting as the sales agent. The proceeds from
the general cargo sale after deduction of the commission payable to Cathay Pacific shall belong to
AHK and shall be paid by Cathay Pacific to AHK.
The Agency Agreement will terminate at the same time as the Services Agreement.
The Directors, including the independent non-executive Directors, consider that the terms of these
two agreements (including the terms as to pricing, having regard to the anticipated duration of the
arrangements with DHL and the volume of express materials to be carried for DHL) are fair and
reasonable and in the interests of the Shareholders and are entered into on normal and arms-length
commercial terms (and if there are no sufficient comparable transactions to judge whether they are
on normal commercial terms, on terms no more favourable to DHL than terms available to
independent third parties).
Connection between the parties:
DHL is a connected person of Cathay Pacific because of DHL Worldwide Express’ 30% interest in
Application for waiver
The Directors believe that strict compliance with the disclosure requirement in respect of the
Transactions would be impractical and unduly onerous on the part of Cathay Pacific as they are of a
regular and continuing nature. Cathay Pacific has applied to the Stock Exchange for a waiver from
strict compliance with the normal disclosure requirements relating to the Transactions under rule
14.25 of the Listing Rules on each occasion when they arise, subject to the following conditions:
(a) the Transactions shall be:
(i) entered into by Cathay Pacific and AHK in the usual and ordinary course of its
(ii) conducted either (1) on normal commercial terms or (2) (where there is no sufficient
comparables) on terms no more favourable to DHL than terms available to
independent third parties; and
(iii) entered into on terms that are fair and reasonable insofar as the Shareholders of
Cathay Pacific are concerned;
(b) the yearly aggregate value of the Transactions shall remain less than 3% of the net tangible
assets of the Group in the relevant financial year;
(c) summary details of the Transactions will be disclosed in the annual report of Cathay Pacific
for the relevant year in accordance with the requirements under rule 14.25(1)(A) to (D) of
the Listing Rules;
(d) the independent non-executive Directors shall review the Transactions and confirm in the
annual report of Cathay Pacific of the relevant year that such transactions have been
conducted in the manner as stated in paragraphs (a) and (b) above;
(e) the auditors of Cathay Pacific shall review annually the Transactions and confirm to the
Board in writing (contents of which will be stated in the annual report of Cathay Pacific),
copies of which will be provided to the Stock Exchange, that:
(i) the Transactions have been approved by the Board of Cathay Pacific;
(ii) the Transactions have been entered into in accordance with the terms of the two
agreements dated 17th October 2002 as described above; and
(iii) the limit set out in paragraph (b) above has not been exceeded.
In the event that, for whatever reason, the auditors of Cathay Pacific decline to accept the
engagement or are unable to provide the written confirmation as stated in paragraph (e) above, the
Directors shall contact the Stock Exchange immediately.
If the value of the Transactions for any relevant financial year exceeds the higher of either
HK$10,000,000 or 3% of the audited consolidated net tangible assets of the consolidated accounts
of Cathay Pacific or in the event that there are any material amendments to the two agreements as
described above, the Stock Exchange has indicated that the applicable requirements relating to
connected transactions under the Listing Rules in respect of such transactions should be fully
complied with by Cathay Pacific.
Reasons for, and benefits of, entering into the agreements
The principal activity of Cathay Pacific is the operation of scheduled airline services operations
which are principally to and from Hong Kong, and other related services including airline catering,
aircraft handling and engineering.
AHK is a regional air freight carrier.
DHL operates an international express cargo business.
Express cargo is the fastest growing sector in the air cargo transportation business. Cathay Pacific
believes that the arrangements with DHL will provide an excellent opportunity to expand its
presence in this expanding area of activity and will underpin the development of AHK’s business.
“AHK” AHK Air Hong Kong Limited, a company incorporated in
Hong Kong and wholly-owned by Maplebeck immediately
prior to the completion of the Sale and Purchase Agreement
“AHK Shares” shares of any class in the capital of AHK
“ Cathay Pacific” Cathay Pacific Airways Limited
“DHL” DHL International Limited, a company incorporated in
“DHL Worldwide Express” DHL Worldwide Express B.V., a company incorporated in the
Netherlands and wholly-owned by DHL
“Group” Cathay Pacific and its subsidiaries
“Maplebeck” Maplebeck Limited, a company incorporated in the Isle of Man
and wholly-owned by Cathay Pacific
“Sale and Purchase the sale and purchase agreement dated 17th October 2002
Agreement” entered into between Maplebeck, Cathay Pacific, DHL
Worldwide Express and DHL in relation to the sale of certain
AHK Shares by Maplebeck to DHL Worldwide Express
“Services” the sale of space on certain cargo services operated by AHK in
the Asian region for the carriage of DHL’s door to door air
“Transactions” the transactions contemplated under the Services Agreement
and the Agency Agreement.
By Order of the Board
Cathay Pacific Airways Limited
Margaret Yu Chan Sau Mui
Hong Kong, 17th October 2002