HIGHER OPERATING PROFIT OFFSET BY LOSSES FROM ASSOCIATED COMPANIES AND EXCEPTIONAL ITEMS

GROUP FINANCIAL PERFORMANCE

Third Quarter 2013-14

The Group recorded an operating profit of $151 million in the third quarter of the 2013-14 financial year, $20 million higher (+15.3%) than a year ago.

Group revenue was flat at $3,875 million as higher passenger carriage was offset by weaker yields (down by 2.7%) due to efforts to stimulate demand amid the competitive environment and unfavorable exchange rate movements on major revenue generating currencies.

Group expenditure decreased marginally by $5 million (-0.1%) to $3,724 million, largely owing to lower net fuel cost despite appreciation of the US Dollar, as average jet fuel prices decreased 5.6% year-on-year. This was partially offset by higher staff and non-fuel variable costs which rose in line with the increase in capacity.

Group net profit for the third quarter was $50 million, a decline of $93 million (-65.0%) from the corresponding period a year ago. This was largely due to exceptional items of $80 million [See Note 2 below] and share of losses and one-off items from associated companies, mainly Tiger Airways Holdings Limited (“Tiger Airways”) [see Note 3 below].

The one-off items from Tiger Airways arose from impairment in Tigerair Mandala and losses related to assets held for sale in Tigerair Philippines, together $46 million.

Excluding the exceptional items and impairment losses from Tiger Airways, Group net profit would have improved by $33 million or 23.1%.

The operating results of the main companies in the Group for the third quarter of the financial year are as follows:

· Parent Airline Company Operating profit of $130 million
($87 million profit in 2012)
· SIA Engineering Operating profit of $25 million
($31 million profit in 2012)
· SilkAir Operating profit of $6 million
($34 million profit in 2012)
· SIA Cargo Operating profit of $1 million
($29 million loss in 2012)

The operating profit of the Parent Airline Company improved $43 million year-on-year, mainly from a 1.2% reduction in expenditure. Strict cost management helped to keep cost items in check as passenger unit cost decreased by 2.2%.

SilkAir’s operating profit in the third quarter of the financial year was $28 million lower as passenger carriage growth lagged behind capacity injection to develop emerging destinations in the region.

SIA Cargo reported an operating profit of $1 million during the seasonal peak in the third quarter, supported by ongoing efforts to better match capacity with demand.

April to December 2013

For the nine months to December 2013, Group operating profit improved $47 million (+17.2%) to $320 million.

Group revenue was up $185 million (1.6%) to $11,616 million, mainly due to recognition of the settlement pertaining to changes in aircraft delivery slots [see Note 4 below] and growth in passenger carriage. Group expenditure increased largely due to higher staff costs and other variable costs, though at a slower pace of 1.2% ($138 million) to $11,296 million.

The Group posted a net profit of $332 million for the April-December period, $21 million higher (+6.8%) year-on-year. This is due to an increase in operating profit, non-operating items from sale of aircraft and tax write-backs, partially offset by share of losses from associated companies this year against share of profits from associated companies last year and higher exceptional items [see Note 5 below].

THIRD QUARTER 2013-14 OPERATING PERFORMANCE

The Parent Airline Company carried 4.783 million passengers in the third quarter of the financial year, an increase of 2.1% over the same period in the previous year. Growth in passenger carriage (0.7% in revenue passenger kilometers) was marginally higher than the expansion in capacity (0.5% in available seat-kilometers), resulting in a 0.1 percentage point increase in passenger load factor to 79.4%.

SilkAir’s passenger carriage grew 5.2%, but it lagged behind capacity growth of 13.1%. Consequently, passenger load factor was 5.3 percentage points lower at 70.0%.

SIA Cargo’s load factor declined 1.3 percentage points to 63.5%, as the 3.5% reduction in freight carriage (in load ton-kilometers) outpaced the 1.6% reduction in cargo capacity (in capacity ton-kilometers).

FLEET AND ROUTE DEVELOPMENT

During the October-December quarter, the Parent Airline Company took delivery of one A330-300 and decommissioned four A340-500s for sale to Airbus. As at 31 December 2013, the operating fleet of the Parent Airline Company comprised 100 passenger aircraft – 56 B777s, 25 A330-300s and 19 A380-800s, with an average age of 6 years and 8 months.

As at 31 December 2013, SilkAir’s operating fleet comprised 24 aircraft – 18 A320-200s and six A319-100s. SilkAir will take delivery of its first two Boeing 737-800 aircraft in February 2014 and March 2014 with a seat configuration of 12 Business Class seats and 150 Economy Class seats. Two A320-200s will leave the fleet during the January-March 2014 period.

Scoot’s fleet comprised six B777-200s, while SIA Cargo operated a fleet of nine B747-400 freighters.

With the commencement of the Northern Summer season (30 March 2014 – 25 October 2014), the Parent Airline Company will add a third daily flight to Tokyo’s Haneda Airport, increasing the number of daily services to Tokyo to five.

During the quarter, SilkAir commenced services to Yogyakarta, extending the airline’s reach to 12 destinations in Indonesia. From the Northern Summer 2014 season, SilkAir plans to operate to two new destinations, Kalibo in the Philippines and Mandalay in Myanmar. Commencement of these services is subject to slots and rights approval from the authorities.

Scoot launched services to Hong Kong and Perth in November 2013 and December 2013, bringing the number of destinations it serves to 13 cities. On 19 December 2013, Scoot and Nok Airlines Public Co Ltd (“Nok Air”) announced the signing of a memorandum of understanding to establish a new low-cost airline to be based in Bangkok. The new airline will be named NokScoot and will be based at Don Mueang International Airport. It will operate widebody aircraft on medium and long-haul international routes.

OUTLOOK

The outlook for the air transportation industry continues to be challenging with airlines offering aggressive fares amidst increasing capacity, and fuel prices remaining high by historical standards.

Advance passenger bookings for the fourth quarter are slightly lagging the planned capacity increase due to the shift in Easter holiday travel demand from March last year to April this year. Efforts to stimulate demand to boost loads will continue to place pressure on yields.

Air cargo demand is projected to be relatively flat. However, cargo yields are likely to remain under pressure as the cargo business continues to face overcapacity.

Under these circumstances, the Group will proactively make adjustments to flight schedules and capacity to match market demand. Discipline on costs will be maintained. With strong finances, the Group is well positioned to meet the challenges ahead.