Singapore Reports Mixed Results

22nd May 2003

Singapore Airlines: After a strong performance in the first half of the financial year, results in the
second half were affected by developments beyond the SIA Group’s control. The bomb
blasts in Bali, the build up to war and the war itself in Iraq caused a severe softening of
While Severe Acute Respiratory Syndrome (SARS) only hit business near the end
of the financial year and had little effect on the 2002-03 results, it has since dealt a
devastating blow to the aviation industry in East Asia and SIA, among other major airlines.
The first quarter of 2003-04 (April to June 2003) is expected to show a loss.
Profit attributable to shareholders for the year ended 31 March 2003 was $1,065
million, $433 million more (+68.6%) than in 2001-02. This included tax writeback
accounted for in the half-year ended September 2002, amounting to $278 million and
arising from a reduction in the corporate tax rate to 22 per cent. Without the writeback of
tax, arising mainly from previous years’ provision for deferred tax, profit attributable to
shareholders would have been $787 million, an increase of 24.6 per cent over the previous
The Group’s operating profit dropped 22.4% (-$208 million) to $717 million.
Revenue was 12.1% higher (+$1,132 million) at $10,515 million, while expenditure grew
15.8% (+$1,340 million) to $9,798 million. Expenses were higher for staff costs (+$466
million, principally on account of profit-sharing bonus totalling $304 million, versus nil in
previous year), aircraft maintenance and overhaul (+$220 million), depreciation expenses
(+$121 million), fuel (+$101 million), commissions and incentives (+$91 million), insurance
(+$79 million), landing, parking and overflight charges (+$45 million), and rentals on lease
of aircraft (+$44 million). Without the provision for profit-sharing bonus, expenditure would
have grown at a lower rate of 12.2%, and operating profit would be higher at $1,021 million
The Group’s operating profit recorded for the first half and second half of the
year were $510 million and $207 million respectively.
There were 96 aircraft in SIA’s operating fleet as at 31 March 2003, four more
than at the end of the previous year. The fleet comprised 39 B747-400s, 45 B777s
(23 B777-200s, 8 B777-300s and 14 B777-200ERs), 3 A340-300s and 9 A310-300s.
During the financial year, SIA took delivery of 12 B777s (of which eight were
long-range B777-200ERs) to cater to growth and fleet renewal.
Five A340-300s were traded in to Boeing and two A310-300s to Rolls-Royce. Two
B747-400s were retired from the operating fleet and are being marketed for sale or lease.
Two A310-300s were leased out and one B747-400 passenger aircraft sold and
leased back.
The entire fleet of 14 B777-200ER aircraft, which fly the long haul routes, are
now equipped with lie-flat Spacebed seating in Raffles Class and the Matsushita System
3000 Audio-Video-on-Demand (AVOD) system in every seat.
In June 2002, the first B747-400 retrofitted with the Spacebed seat was
introduced on the London route. Eighteen of these aircraft are now fitted with Spacebed,
and are currently deployed on the London, Sydney, Melbourne, Frankfurt, Amsterdam, New
York and Tokyo services.
All cuts in capacity in the aftermath of September 11, 2001 were fully restored
by May 2002. Throughout the year, more capacity was added to a number of countries.
China, in particular, saw large growth, with services to Shanghai growing progressively from
10 times weekly to three times daily by October 2002, and Beijing and Guangzhou
benefiting from larger capacity B777 aircraft.
With the opening of the second runway at Tokyo’s Narita airport, an additional
three-times-weekly B772 service was launched in April 2002. Three more weekly flights
were mounted to Dubai in June, while frequencies to Christchurch and Brisbane were also
increased. More capacity was added through frequency increase and substitution of A310
aircraft with larger B777s.
In August, SIA launched a first-ever direct service between South East Asia and
Las Vegas, with three flights a week via Hong Kong using the long-range B777-200ER
aircraft. The same aircraft type was introduced on services to Seoul, San Francisco,
Vancouver, Jeddah and Christchurch.
Following the bomb blasts in Bali in October 2002, frequencies to Bali were
temporarily reduced but were fully restored by December 2002.
With the restructuring of services to South Africa, operations to Durban ceased in
January 2003. Johannesburg is now served daily on a non-stop basis. Services to Pakistan
and Kathmandu were suspended from May and June 2002 respectively, for security reasons.
Unfortunately, with the advent of SARS, growth had to be reversed and
substantial reductions in capacity made in April and May 2003.
The revised Statement of Accounting Standard (SAS) 20 [The Effects of Changes
in Foreign Exchange Rates] came into effect on 1 April 2002. Accordingly, financial results
of foreign subsidiary, associated and joint venture companies are now translated into
Singapore dollars at the annual average exchange rates. Previously, such results were
translated at exchange rates at the balance sheet date. The change in accounting policy
was applied prospectively because the effect of adopting the revised SAS 20 was not
There was no buyback of the Company’s shares during the period under review.
On 1 July 2002, the Company made a fourth grant of share options to
employees. Staff accepted 13,658,152 share options (99.1% of total options offered) for
exercise between 1 July 2003 and 30 June 2012.
In July 2002, the Company issued 1,000 shares upon exercise of options granted
under the Employee Share Option Plan. As at 31 March 2003, there were 51,826,922
unexercised options under the Plan.
An interim dividend of 6 cents per share, less tax at 22.0%, amounting to $57
million, was paid on 21 November 2002.
The Directors propose that a final tax exempt (one-tier) dividend of 9 cents per
share, amounting to $110 million, be paid for the financial year ended 31 March 2003. This
brings the total dividend for financial year 2002-03 to 15 cents per share, unchanged from
the previous year.
On 3 April 2003, five Pratt and Whitney 4056 engines were sold to UT Finance
The Company took delivery of one new A340-300 and B777-200A aircraft on
29 April and 1 May 2003 respectively. The A340-300 aircraft was traded-in to Boeing on
8 May 2003.
SIA retired the last three aircraft in its A340-300 fleet in mid-April 2003, and the
remainder of the A310-300 fleet, comprising nine aircraft, will follow by June. By that time,
five B747-400 aircraft will be temporarily withdrawn from the operating fleet.
With most of the SARS-affected countries being in the East Asia region, the
impact on SIA services was severe, and the Airline took swift action to manage its costs.
This included a 30% reduction in capacity, in terms of available seat kilometers, for the
period April to June 2003. Operations to six destinations - Brussels, Chicago, Las Vegas,
Hiroshima, Kaohsiung and Mauritius - were terminated, while those to Fukuoka, Jeddah,
Guangzhou and Madrid were suspended. The launch of a thrice-weekly Bangalore service
has been deferred. Meanwhile, SilkAir, the SIA Group’s regional airline, announced cutbacks
in capacity of 24%.


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