HIGHLIGHTS OF THE SIA GROUP’S FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000

 INTRODUCTION
The SIA Group’s unaudited results for the six months ended 30 September 2000 were released on 27 October 2000. A summary of the financial and operating statistics for the period under review is shown in Annex A. All monetary figures are in Singapore Dollars.
EARNINGS

With sustained economic recovery in key Asian markets, the Company’s operating profit for the six months ended 30 September 2000 increased by $194 million (+52.0%) from the same period in 1999, to $569 million. Revenue was $666 million higher (+16.9%) at $4,615 million, while expenditure grew by $472 million (+13.2%) to $4,046 million, mainly from the escalation in fuel costs (+$296 million or 57.8%). Rising fuel prices were partially mitigated by hedging gains and a young aircraft fleet.

The Company’s profit before tax was $1,212 million, up $567 million (+88.0%) after the inclusion of:-

(i) a surplus of $58 million from the sale and leaseback of one B747-400 passenger aircraft, the trade-in of one A310-200 aircraft, the sale and leaseback of six A340-300 spare engines, and the sale of spares and other spare engines;

(ii) lower gross dividends from subsidiaries and associated companies of $10 million [Singapore Airport Terminal Services Limited (SATS) and SIA Engineering Company (SIAEC) did not pay a final dividend for financial year 1999-2000, but a special dividend was paid in March 2000 totalling $371 million as part of a capital restructuring prior to their initial public offerings (IPOs) on 5 May 2000]; and

(iii) a profit of $575 million on disposal of vendor shares representing 13.0% equity interests in SATS and SIAEC. At Group level, the profit from the IPOs amounted to $440 million after deducting 13% of the net tangible assets of SATS and SIAEC as at 5 May 2000 from the net proceeds of sale.

In the same period in 1999, there were (i) a surplus of $47 million realised from the sale and leaseback of two B747-400 passenger aircraft, and the sale of spares and spare engines, and (ii) a profit of $111 million on disposal of the entire investments in Delta Air Lines (DL) and Swissair (SR). If the profits from the IPOs in the current year and the sale of investments in DL and SR in 1999 were excluded, profit before tax would have increased by $103 million (+19.3%) to $637 million.

Profit attributable to shareholders rose by $538 million (+106.1%) to $1,045 million as provision for taxation increased $29 million (+21.2%) on account of higher chargeable income.

The operating profit of the subsidiaries went up by $10 million (+6.5%) to $170 million. This was mainly attributable to higher profits of SIAEC Group (+$16 million) and SATS Group (+$5 million), and lower losses (+$6 million) incurred by SilkAir, partially offset by lower profit (-$16 million) from Sing-Bi Funds and a loss ($3 million) incurred by Auspice against a profit ($1 million) achieved last year. The profit after tax of the subsidiaries was $165 million, up $15 million (+10.3%).

The Group’s operating profit rose $206 million (+38.5%) to $739 million. Profit before tax was $1,383 million, an increase of $653 million (+89.3%). Share of profits of associated companies rose $101 million (+503.5%) to $121 million mainly on account of the contribution from Virgin Atlantic Limited (VAL) during a period that included the summer peak season results. Profit attributable to shareholders at $1,141 million was $551 million higher (+93.3%). If the profits from the IPOs of SATS and SIAEC in the current year and the sale of investments in DL and SR in 1999 were excluded, profit attributable to shareholders would have increased by $221 million (+46.1%) to $701 million.

CAPACITY, TRAFFIC AND LOAD FACTORS

Traffic carried rose 11.5%, which surpassed capacity increase of 8.5%. Consequently, overall load factor was 2.0 percentage points better at 72.9%. Passenger load factor improved 3.0 percentage points to 77.8%, while cargo load factor was 0.9 percentage point higher at 69.3%.

YIELD, UNIT COST AND BREAKEVEN LOAD FACTOR

Overall yield improved 2.9¢/ltk (+4.4%) to 68.4¢/ltk, with passenger yield rising 3.7% and cargo yield up 4.8%. The increase in overall yield was attributable to (i) higher local currency yields and change in the fare mix (+3.0¢/ltk), and (ii) a higher proportion of passengers than cargo in the traffic mix (+0.3¢/ltk), partially offset by a loss from the strengthening of the Singapore Dollar against the foreign currencies making up SIA’s revenue (-0.4¢/ltk). Unit cost was 2.0¢/ctk higher (+4.6%) at 45.1¢/ctk as expenditure grew (+13.2%) at a higher rate than capacity (+8.5%).

With overall yield rising at a lower rate (+4.4%) than unit cost (+4.6%), breakeven load factor increased 0.1 percentage point to 65.9%.

REVENUE

The Company’s revenue was $4,615 million, an increase of $666 million (+16.9%). Passenger and cargo revenue rose $487 million (+16.8%) and $146 million (+16.2%) respectively.

The Group’s revenue increased $662 million (+15.4%) to $4,966 million.

EXPENDITURE

The Company’s expenditure rose $472 million (+13.2%) to $4,046 million. The main expenditure increases were in fuel costs (+$296 million or 57.8%), staff costs (+$63 million or 10.7%), provision for frequent flyer costs (+$36 million or 81.8%), handling charges (+$32 million or 7.8%), aircraft maintenance and overhaul costs (+$22 million or 8.3%), rentals on lease of aircraft (+$17 million or 15.6%), and landing, parking and overflying charges (+$13 million or 5.8%). These were partially offset by lower exchange loss (-$24 million or 48.7%).

The Group’s expenditure amounted to $4,227 million, up $456 million (+12.1%).

ISSUED SHARE CAPITAL

Under the share buyback programme (which was first approved by shareholders on 11 September 1999, with the mandate renewed at the Company’s extraordinary meeting on 15 July 2000), the Company made a further purchase of 25,629,600 of its shares between 1 April and 30 September 2000 at a total cost, including brokerage, of $407 million. As at 30 September 2000, the issued share capital of the Company, after taking into account the share buybacks, was 1,224,902,622 shares. The amount spent so far under the programme at 30 September 2000 for 57.6 million shares totalled $917 million ($510 million up to 31 March 2000 plus $407 million from 1 April 2000 to 30 September 2000), including brokerage but excluding Section 44 tax prepayments of $316 million.

SHARE OPTION PLAN

On 3 July 2000, the Company made a second grant of share options and 12,258,890 share options were accepted by eligible employees to subscribe for ordinary shares under the SIA Employee Share Option Plan (the Plan) for the exercise period 3 July 2001 to 2 July 2010. As at 30 September 2000, options to subscribe for 26,192,180 ordinary shares remain outstanding under the Plan.

INVESTMENT IN AIR NEW ZEALAND

During the period under review, the Company acquired a 25% equity interest (8.3% on 11 April 2000 and 16.7% on 8 August 2000) in Air New Zealand class B shares at a total cost of $355 million. Goodwill arising from the acquisition (as a result of the cost of investment exceeding the net book values of tangible assets acquired) amounted to $96 million. At Group level, the amount of the goodwill is written off against shareholders’ distributable reserves.

INTERIM DIVIDEND

An interim dividend of 15.0 cents per $1 ordinary share, less income tax at 25.5% (amounting to $137 million) has been declared. The interim dividend of 15.0 cents per $1 ordinary share is 5.0 cents higher than in the preceding year.

FINANCIAL POSITION

At 30 September 2000, the shareholders’ funds of the Group amounted to $11,463 million, a drop of $931 million (-7.5%) from a year ago after accounting for (i) share buyback of 40.3 million shares since 1 October 1999 at a total cost of $642 million, (ii) goodwill of $1,589 million arising from the investment in Virgin Atlantic Limited written off against shareholders’ distributable reserves, (iii) goodwill of $96 million written off against shareholders’ distributable reserves resulting from the investment in Air New Zealand, and (iv) retained profit of $1,005 million.

The net tangible assets per share of the Group fell $0.44 (-4.5%) to $9.36 at 30 September 2000.

The Group’s total assets stood at $17,527 million on 30 September 2000, down $21 million (-0.1%).

The net liquid assets of the Group dropped $1,296 million (-42.2%) to $1,775 million at 30 September 2000. This was mainly because of investments in Virgin Atlantic Limited and Air New Zealand, aircraft purchases, and the share buyback of the Company’s shares, partially offset by proceeds from the IPOs of SATS and SIAEC, and sales of aircraft.

STAFF PRODUCTIVITY

The Company's average staff strength increased by 400 (+2.9%) mainly from cabin crew (+273) to 14,012. The Company's staff productivity, measured by the average changes in capacity produced, load carried, revenue earned and value added per employee, improved 14.6% (if the profits from the IPOs in the current year and the sale of investments in DL and SR in 1999 were excluded, the improvement would have been 8.4%).

The Group's staff strength rose 557 (+2.0%) to 27,952. Group staff productivity, measured by revenue and value added per employee, improved 13.1% and 31.5% respectively (if the profits from the IPOs in the current year and the sale of investments in DL and SR in 1999 were excluded, value added per employee would have improved by 18.0%).

FLEET AND ROUTE DEVELOPMENT

On 29 September 2000, Singapore Airlines (SIA) announced an US$8.6 billion order for 25 super-jumbo A3XX very large aircraft (VLA). The price tag includes the cost of spares and installed engines (but not spare engines).

The prices are applicable at the time of aircraft delivery, between early 2006 and 2011, with price escalation factors incorporated.

Ten of the aircraft are firm orders, the rest options. The 15 options can be exercised for freighters as well as passenger aircraft.

The VLA with over 500 seats will be the largest passenger aircraft ever produced. With the first delivery scheduled for early 2006, SIA will be the first airline in the world to accept and operate this revolutionary aircraft. (SIA was also the first airline, together with a US airline, to operate the Boeing 747-400).

The A3XX has a range of 7,500 nautical miles, in SIA’s configuration. SIA intends to deploy it on its high-density routes to London, Los Angeles, San Francisco, New York, Tokyo, Hong Kong and Sydney.

The A3XX routes to the USA will entail an intermediate point. They will complement the non-stop services that SIA plans to operate to US points in 2002 with the super-long-range Airbus A340-500.

On 13 October 2000, SIA announced the selection of the Rolls Royce Trent 900 series engines to power its 25 super-jumbo A3XX very large aircraft.

The US$8.6 billion A3XX order (announced on 29 September 2000) had included the cost of installed engines and spares, but not spare engines. The cost of the Trent 900 series spare engines will add another US$245 million to the A3XX aircraft order.

With a fan diameter of 116 inches, the Trent 900 will be initially rated at 70,000 pounds of thrust. It will incorporate a three-shaft design and will be a scaled version of the proven Trent 800, which powers SIA’s Boeing 777 fleet. The engine will also be designed to meet the stringent QC2 noise certification on the A3XX.

In April-September 2000, one B747-400 passenger aircraft was sold and leased back and one surplus A310-200 passenger aircraft was traded-in to Boeing. No new passenger aircraft was delivered during this period.

As at 30 September 2000, SIA's operating fleet comprises 84 passenger aircraft --- 36 B747-400s, 18 B777s (8 B777-200s, 5 B777-200As and 5 B777-300s), 15 A340-300s and 15 A310-300s.

From 26 March 2000, frequency to Athens was increased by one, to 4 times weekly. Frankfurt service was increased from 10 times a week to 11 times on 1 July 2000.

Capacity on Singapore-Bangkok-Seoul routes was boosted from 3 to 5 times A340-300 weekly services at the commencement of Northern Summer 2000. From 1 July 2000, the Singapore-Taipei-Osaka flights were reduced to 3x weekly B777-200 from 4x weekly B747-400. Concurrently, 3 more B777-200 weekly non-stop flights were introduced to Osaka. Additional 4 times weekly services were also introduced to Hong Kong.

Frequency to Surabaya was increased to 12 times A310-300 weekly services from 26 March. Jakarta services were restored from 7 times to 8 times daily. 3x additional A313 Singapore-Bali night-stop services were introduced from 1 July 2000 allowing Bali to be served more frequently, in view of the continuing favourable Bali appeal particularly among Japanese and European tourists.

From Northern Summer 2000, services to Lahore and Karachi were increased from 3 times to 4 times weekly. New Delhi also enjoys an additional service, effecting a daily B777-200 product. Capacity was also increased on the Bombay and Madras routes through the use of bigger aircraft.

Commencing April 2000, a third daily service to Sydney was introduced to meet the strong demand from the Olympics Games traffic. Capacity to Melbourne was also increased to the operation of twice daily B747-400 services.

Another 747-400 freighter joined the fleet in September 2000 - bringing the fleet to nine Mega Arks. A new freighter service will be inaugurated to Osaka, Japan. A new routing to the USA via Hong Kong will add frequencies to San Francisco and Los Angeles. Another frequency will be added to Copenhagen.

SUBSEQUENT EVENTS

The Company has concluded an agreement to sell two B747-300 Combis.

On 29 September 2000, the Company announced an US$8.6 billion order for 25 (10 firm and 15 options) super-jumbo A3XX very large aircraft. The price includes the cost of spares and installed engines but not spare engines. Following the order, the Company has selected Rolls Royce Trent 900 series engines to power its 25 super-jumbo A3XX. In addition, the Company also ordered Rolls Royce Trent 900 series spare engines at a cost of US$245 million.

The Company has decided to purchase from Boeing six firm B747-400 freighter aircraft with options for nine more at a total cost of US$3.4 billion. The purchase entails a trade-in of two B747-300 passenger aircraft to Boeing.

Air New Zealand announced that the company will raise up to NZ$284 million by way of a renounceable pro rata offer of New Ordinary Shares to existing shareholders on the basis of one New Ordinary Share for every three A Ordinary or three B Ordinary shares held, at the issue price of NZ$1.50 per share. The Company intends to take up its entitlement of 47,291,636 New B Ordinary Shares under the issue at a total cost of NZ$71 million due for payment on 3 November 2000.

OUTLOOK FOR SECOND HALF OF THE FINANCIAL YEAR

The outlook for passenger and cargo in the second half of the year is good. Passenger traffic is expected to continue to be strong and load factors high. Stations will be encouraged to uphold yields. For cargo, intra-Asia airfreight movements and Asian exports to Europe and United States of America are projected to be moderately strong over the next six months.

However, escalating fuel costs will remain a major concern. As at 30 September 2000, about 50% of SIA’s fuel requirements for the second half has been hedged.

Annex A

UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000

FINANCIAL STATISTICS

* Based on the weighted average number of fully paid shares in issue.

# Based on the weighted average number of fully paid shares in issue after adjusting for dilution of shares under the employee share option plan.

@ Including 4.75 cents per $1 ordinary share tax-exempt dividend.

Annex A

OPERATING STATISTICS - COMPANY

Glossary


Load tonne-km (ltk)=Load carried (in tonnes) x distance flown (in km)

Capacity tonne-km (ctk) = Capacity production (in tonnes) x distance flown (in km)

Overall load factor = Load tonne-km expressed as a percentage of capacity tonne-km

Revenue passenger-km = Number of passengers carried x distance flown (in km)

Available seat-km = Number of available seats x distance flown (in km)

Passenger load factor = Revenue passenger-km expressed as a percentage of

available seat-km

Cargo load tonne-km = Cargo load carried (in tonnes) x distance flown (in km)

Cargo capacity tonne-km = Cargo capacity production (in tonnes) x distance flown

(in km)

Cargo load factor = Cargo load tonne-km expressed as a percentage of cargo capacity tonne-km

Yield = Operating revenue from scheduled services divided by load tonne-km

Unit cost = Operating expenditure divided by capacity tonne-km

Breakeven load factor = Theoretical load factor at which operating expenditure equals operating revenue, i.e. unit cost divided by yield