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ANNUAL REPORT 05/06

Table of contents

  • Page 1
    ANNUAL REPORT 05/06

  • Page 2

  • Page 3
    ... Awards and Accolades Alliance Partners and Codeshare Services Supporting Our Communities Developing Our People Safety, Security and Environment Subsidiaries and Associated Companies List of Awards Statement on Risk Management Corporate Governance Report Financials Notice of Annual General...

  • Page 4
    .... Net asset value per share is computed by dividing equity attributable to equity holders of the Company by the number of ordinary shares in issue at 31 March. Dividend cover is profit attributable to equity holders of the Company divided by total dividend. 02 Singapore Airlines Annual Report 05...

  • Page 5
    STATISTICAL HIGHLIGHTS OPERATING STATISTICS 2005-06 2004-05 % Change SIA Passengers carried (thousand) Revenue passenger-km (million) Available seat-km (million) Passenger load factor (%) Passenger yield (cents/pkm) Passenger unit cost (cents/ask) Passenger breakeven load factor (%) SIA Cargo Cargo...

  • Page 6
    ... of the Wah Chang Group of companies, Singapore Management University and MediaCorp Pte Ltd. He is a member of the Advisory Board of both London Business School and INSEAD. Mr Ho was Chairman of Thai Wah Public Company Limited, a Director of Standard 04 Singapore Airlines Annual Report 05/06

  • Page 7
    ... Accountants and the Australian Institute of Company Directors. He was made an Officer of the Order of Australia in 2002 for service to the community through Australian visual and performing arts organisations, through the development of government policy, and through the promotion of corporate...

  • Page 8
    ... the focus of world attention in late 2006, when we become the First to Fly the new Airbus A380. Around the same time, we will also receive the first of our new Boeing 777-300ERs. Putting any new aircraft type into service is complex, and involves hundreds of 06 Singapore Airlines Annual Report 05...

  • Page 9
    ...the policy of maintaining a young ï¬,eet of aircraft, to benefit from the latest technology in the area of fuel consumption. But even together, these initiatives cannot protect us totally from higher expenditure on fuel. As a Group, we are conscious that other measures to deal with high fuel prices...

  • Page 10
    ...Pitman COMPANY SECRETARY Loh Meng See SHARE REGISTRAR M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore 068906 BOARD COMMITTEES* (From 1 April 2006) Board Executive Committee Chairman Stephen Lee Ching Yen Members Chew Choon Seng Fock Siew Wah Charles B Goode...

  • Page 11
    ... Regional Vice President South West Pacific SENIOR MANAGEMENT, MAJOR SUBSIDIARIES Hwang Teng Aun (until 31 May 2006) Goh Choon Phong (from 1 June 2006) President Singapore Airlines Cargo Pte Ltd Ng Chin Hwee President and Chief Executive Officer Singapore Airport Terminal Services Ltd William Tan...

  • Page 12
    ... in the world to introduce live TV on international ï¬,ights. • Singapore Airlines Cargo launched a twiceweekly freighter service to Johannesburg, linking South Africa with Europe, USA and Asia. • Against the backdrop of escalating fuel prices, the Singapore Airlines Group reported a net pro...

  • Page 13
    ... million in the second quarter of financial year 2005-06. • SATS refreshed its brand image by adopting a new corporate identity. • Singapore Airlines resumed a three-times-weekly service to Karachi and Lahore in Pakistan. • The Singapore Airlines Group posted a net profit of $396.6 million...

  • Page 14
    OPERATING REVIEW "I know it's the standard of service I provide that distinguishes Singapore Airlines from our competitors. Not just once, but every day, every ï¬,ight." 12 Singapore Airlines Annual Report 05/06

  • Page 15
    ... new Boeing 777-300ER aircraft at around the same time were well underway. NETWORK EXPANSION Singapore Airlines expanded its network globally to destinations in Asia, South West Pacific, Europe and the Middle East, to meet the growing demand for air travel. From June 2005, the Airline added more...

  • Page 16
    ... the Airline sold one B747-400, and two A310s. The passenger ï¬,eet of the Airline, as at 31 March 2006, consisted of 90 aircraft, with an average age of six years and four months. Included among the 90 aircraft are 58 Boeing 777s. Singapore Airlines is still the world's largest operator of the B777...

  • Page 17
    ..., entertainment, retail and food and beverage industries. Its unique offering earned the Airline a Gold Award in the Marketing, Carrier (International-Air) category at the Pacific Asia Travel Association Awards 2006 for the second year running. The Airline teamed up with Singapore Changi Airport to...

  • Page 18
    OPERATING REVIEW "Safety, reliability and punctuality are what our customers expect. I'm proud to be part of a team that accepts those responsibilities and takes them seriously." 16 Singapore Airlines Annual Report 05/06

  • Page 19
    ...by Airbus executives on the progress of the A380. A fully interactive A380 website, singaporeair.com/a380, was launched to provide information on the development of the aircraft. To date, over 50,000 people have signed up to receive regular updates. With the first Singapore Airlines A380 undergoing...

  • Page 20
    OPERATING REVIEW "There are limits to what we can do with food on an aircraft. But I will push those boundaries to give our customers the best inï¬,ight experience." 18 Singapore Airlines Annual Report 05/06

  • Page 21
    ...customers access through KrisWorld to the latest world, regional, business, technology, entertainment and sports news. The news is obtained from an extensive list of news sources, including Associated Press, Financial Times, the Wall Street Journal and Dow Jones. 19 Singapore Airlines Annual Report...

  • Page 22
    OPERATING REVIEW Mobile Connectivity In July 2005, Singapore Airlines became the first airline in the world to offer live global TV as part of its inï¬,ight wireless broadband internet service, Connexion By BoeingSM. Customers can use their internet connection to access live broadcasts from BBC ...

  • Page 23
    ... many other recognition benefits appropriately reserved for the Airline's premium customers. KrisFlyer has over 90 global and local non-airline partners including hotels, travel agencies, credit cards, telecommunications providers and insurance companies. 21 Singapore Airlines Annual Report 05/06

  • Page 24
    ... Airline in TIME magazine's 2005 Readers' Travel Choice Awards for the fifth year running and won the award for the Preferred First/Business Class. KrisFlyer was named Best Frequent Flyer Programme. The Australian Chamber of Commerce in Singapore, and the Australian Government's trade development...

  • Page 25
    ... Singapore Airlines believes in the importance of supporting, and being a good corporate citizen, in the communities it serves. During the year in review, the Airline contributed over $2 million in cash and travel to charities, community development programmes, philanthropic and promotional...

  • Page 26
    ... changing business environment. Action plans have been drawn up to address the feedback collected. A number of areas require attention, and work is underway to address them. By 31 March 2006, the staff strength of Singapore Airlines Group was 28,343; an increase of 0.7 percent over the previous year...

  • Page 27
    "Our care and commitment to the highest standards of excellence, backed by training and development, means I give my best to keep our ï¬,eet well-maintained." 25 Singapore Airlines Annual Report 05/06

  • Page 28
    ... management, ï¬,ight safety, security, emergency management, quality assurance, ï¬,ight operations, engineering maintenance, ground handling and cargo operations. The Airline continued to promote and enhance ï¬,ight safety through partnerships with various safety 26 Singapore Airlines Annual Report...

  • Page 29
    "I treat our customers with professionalism, care, courtesy and warmth, so that their travel experience with us begins on the ground, even before they board their ï¬,ights." 27 Singapore Airlines Annual Report 05/06

  • Page 30
    ... work, is expected to begin in August 2006. The PTF business is part of SIAEC's strategy to offer a complete suite of maintenance, repair and overhaul services at its one-stop maintenance hub in Singapore. To gear up for the two new aircraft - A380 and B777-300ER at the end of 2006, engineers...

  • Page 31
    ...The airline, Great Wall Airlines Company Limited, was incorporated in Shanghai. Operations began in June 2006. During the year in review, SIA Cargo secured several key global accounts with organisers of major international events. A total of eight charter ï¬,ights were operated for four Formula One...

  • Page 32
    ... Island, Australia. More personalised service such as plated main course and choice of mealtime was introduced for Business Class passengers on the longer-haul Chinese and Indian sectors. SilkAir was ranked one of the world's best airlines in the annual Travel+Leisure 2005 World's Best Award readers...

  • Page 33
    ... - Airline Industry Category (8th year) Asia Risk Magazine (HK) Asia Risk Awards 2005 Corporate Risk Manager of the Year MARCH 2006 Grand Travel Award (Sweden) Intercontinental Airline (Ranked 2nd) Travel+Leisure Best International Airline for Value 2006 31 Singapore Airlines Annual Report 05...

  • Page 34
    ... Singapore Airlines' business, guidance was issued to business units to help in explicit identification and management of various aspects of reputation risk. In the latest Annual Risk Management Review in Jan-Mar 2006, business units actively reviewed their risks for potential impact to the Company...

  • Page 35
    ...1 April 2005 to 31 March 2006 The Board and Management are committed to increasing shareholder value by creating and maintaining a sound organisational structure, through a process of established corporate governance principles. This Report sets out the Company's corporate governance processes, with...

  • Page 36
    ...both regular items such as reports on its subsidiaries and associated companies, updates on business development, monthly management accounts, and productivity and performance indicators, as well as matters for the decision or information of the Board. The Directors come from diverse backgrounds and...

  • Page 37
    ...the Board to include supervising, monitoring and advising on the compliance by the Company with its Memorandum and Articles of Association, laws and regulations, and the Singapore Exchange Securities Trading Limited (SGX-ST)'s Listing Manual; communicating with the SGX-ST, the Accounting & Corporate...

  • Page 38
    ... for the financial year ended 31 March 2006. Director's fees were retained by the Company. None of the employees of the Company were an immediate family member of any Director or the Chief Executive Officer for the period 1 April 2005 to 31 March 2006. 36 Singapore Airlines Annual Report 05/06

  • Page 39
    CORPORATE GOVERNANCE REPORT For the period 1 April 2005 to 31 March 2006 The remuneration of the Company's key executives for 2005-06 is as follows: Bonus Fee % Salary % Fixed % Variable# % Benefits % Total % Stock options granted during the year Number Exercise price $ Between $1,250,001 to $1,...

  • Page 40
    ... Company's performance and prospects. Management provides the Board with monthly management accounts for the Board's review. The Company has clear policies and guidelines for dealings in the securities of the Company by Directors and employees, which are in conformity with the SGX-ST Best Practices...

  • Page 41
    ... media which includes press releases and SGXNET releases posted on the Company's website, at www.singaporeair.com. The Company's Investor Relations Department meets with key institutional investors on a regular basis, as well as answers queries from shareholders from time to time. The Board members...

  • Page 42
    MEMBERSHIP OF SINGAPORE AIRLINES LIMITED BOARD OF DIRECTORS AND BOARD COMMITTEES For the period 1 April 2005 to 31 March 2006 Board Compensation & Organisation Committee Board Labour Relations Committee Board Executive Audit & Risk Committee Committee Board Finance Committee Safety & Nominating ...

  • Page 43
    ... FINANCIAL SUMMARY OF THE GROUP TEN-YEAR STATISTICAL RECORD TEN-YEAR CHARTS THE GROUP FLEET PROFILE GROUP CORPORATE STRUCTURE INFORMATION ON SHAREHOLDINGS SHARE PRICE AND TURNOVER NOTICE OF ANNUAL GENERAL MEETING 42 60 67 68 69 70 74 75 136 137 138 140 142 143 144 146 148 149 41 Singapore Airlines...

  • Page 44
    ...cent) • Basic earnings per share 101.7 cents (-8.4 per cent) • Equity attributable to equity holders of the Company $13,471 million (+9.1 per cent) • Net asset value $11.00 per share (+8.6 per cent) • Total debt equity ratio 0.17 times (-0.02 times) 42 Singapore Airlines Annual Report 05/06

  • Page 45
    ...the Company Group Profitability Ratios 25 20 15 10 5 0 2001-02 2002-03 2003-04 2004-05 2005-06 150 120 90 Cents 60 30 0 Per cent Return on Turnover (%) Return on Average Equity Holders' Funds (%) Return on Average Total Assets (%) Basic Earnings Per Share (¢) 43 Singapore Airlines Annual Report...

  • Page 46
    FINANCIAL REVIEW Performance of the Group (continued) Financial Position of the Group The Group's total assets stood at $23,370 million as at 31 March 2006, up 7.5 per cent from a year ago. Net asset value per share improved 8.6 per cent to $11.00. Equity holders' funds increased 9.1 per cent to $13...

  • Page 47
    ... above show the Group's value added from 2001-02 to 2005-06 and its distribution by way of payments to employees, government, and to those who have provided capital. It also indicates the portion retained in the business for future capital requirements. 45 Singapore Airlines Annual Report 05/06

  • Page 48
    ... 2005-06 -0.6% point +1.8 % points 12.9% 35.9% 6.4% -1.6% points 44.8% +0.4 % point Amount $million Total Value Added Distribution % Employees Retained in the Business Suppliers of Capital Government 2,481.1 1,984.7 715.6 352.6 44.8 35.9 12.9 6.4 46 Singapore Airlines Annual Report...

  • Page 49
    ...11.0 - Group Average Staff Strength and Productivity 50,000 40,000 Staff Number 30,000 20,000 10,000 0 2001-02 2002-03 2003-04 2004-05 2005-06 500 400 300 200 100 0 $ '000 Average Staff Strength Revenue Per Employee ($'000) Value Added Per Employee ($'000) 47 Singapore Airlines Annual Report 05...

  • Page 50
    FINANCIAL REVIEW Performance of the Company Operating Performance 2005-06 2004-05 % Change Passengers carried (thousand) Available seat-km (million) Revenue passenger-km (million) Passenger load factor (%) Passenger yield (¢/pkm) Passenger unit cost (¢/ask) Passenger breakeven load factor (%) 16...

  • Page 51
    FINANCIAL REVIEW Performance of the Company (continued) Operating Performance (continued) Passenger Load Factor (%) Change 2005-06 2004-05 % points East Asia Americas Europe South West Pacific West Asia and Africa Systemwide Passenger Load Factor by Route Region 90 75 60 Per cent 45 30 15 0 East ...

  • Page 52
    FINANCIAL REVIEW Performance of the Company (continued) Revenue The Company's revenue increased 11.3 per cent to $10,303 million as follows: 2005-06 $ million 2004-05 $ million % Change Passenger revenue Excess baggage revenue Non-scheduled services Bellyhold revenue from SIA Cargo Direct operating...

  • Page 53
    ... 17.0% 46.0% +0.1% point -0.3% point +0.5% point 19.5% 20.7% -0.4% point 20.4% +0.1% point -0.9% point 10.1% +0.3% point East Asia Americas Europe South West Pacific West Asia and Africa East Asia Americas Europe South West Pacific West Asia and Africa 51 Singapore Airlines Annual Report 05/06

  • Page 54
    ...foreign exchange hedging and revaluation loss, comprehensive aviation insurance costs, airport lounge expenses, non-information technology contract and professional fees, expenses incurred to mount non-scheduled services, aircraft licence fees and recoveries. R2 R3 R4 R5 A breakdown of fuel cost...

  • Page 55
    ... from 1 April 2005 which requires the expenditure relating to heavy maintenance visits on aircraft and engine overhauls to be capitalised. Prior to the current financial year, such costs have been charged to profit and loss account on an incurred basis. 53 Singapore Airlines Annual Report 05/06

  • Page 56
    ... change in fuel productivity (passenger aircraft) of 1.0 per cent would impact the Company's annual fuel costs by about $34 million, before accounting for changes in fuel price, USD exchange rate and flying operations. A change in price of one US cent per American gallon affects the Company's annual...

  • Page 57
    ...location is as follows: 2005-06 2004-05 % Change Category Senior staff (administrative and higher ranking officers) Technical crew Cabin crew Other ground staff 1,284 2,024 6,784 3,637 13,729 1,265 1,912 6,637 3,758 13,572 + + + - + 1.5 5.9 2.2 3.2 1.2 Location Singapore East Asia Europe South...

  • Page 58
    ...the SIA Group as at 31 March 2006. The major subsidiary companies are Singapore Airport Terminal Services Limited (SATS), SIA Engineering Company Limited (SIAEC), Singapore Airlines Cargo Private Limited (SIA Cargo), and SilkAir (Singapore) Private Limited (SilkAir). The following performance review...

  • Page 59
    ... of the increased pressure on rates in the current financial year. Revenue from inflight catering, which constituted 42.5 per cent of SATS Group's total revenue, went down 6.3 per cent from $423 million to $396 million due to the loss of Emirates Airlines account with effect from February 2005 as...

  • Page 60
    .... Return on average equity holders' funds was 24.3 per cent, an increase of 5.2 percentage points from 2004-05. Basic earnings per share rose 33.2 per cent to 22.5 cents. Singapore Airlines Cargo 2005-06 $ million 2004-05 R1 $ million % Change Total revenue Total expenditure Operating profit Profit...

  • Page 61
    FINANCIAL REVIEW Performance of Subsidiary Companies (continued) SilkAir 2005-06 $ million 2004-05 R1 $ million % Change Total revenue Total expenditure Operating profit Profit after taxation R1 344.7 331.6 13.1 20.6 295.5 272.6 22.9 30.0 + + - - 16.6 21.6 42.8 31.3 Financial results for 2004-...

  • Page 62
    ... to the Singapore Airlines Limited Employee Share Option Plan (ESOP), the SIA Restricted Share Plan (RSP) and the SIA Performance Share Plan (PSP). The RSP and PSP were approved by shareholders at the Extraordinary General Meeting of the Company held on 28 July 2005. Non-executive Directors are not...

  • Page 63
    ...1.4.2005/ 1.4.2005/ date of date of Name of Director appointment 31.3.2006 21.4.2006 appointment 31.3.2006 21.4.2006 Interest in SIA Engineering Company Limited Ordinary shares Chew Choon Seng 20,000 20,000 20,000 - - - Interest in Singapore Airport Terminal Services Limited Ordinary shares...

  • Page 64
    ...the average of the closing prices of the Company's ordinary shares on the Singapore Exchange Securities Trading Limited ("SGX-ST") for the five market days immediately preceding the date of grant. Under the Employee Share Option Scheme, options will vest two years after the date of grant. Under the...

  • Page 65
    ...) At the end of the financial year, options to take up 79,196,566 unissued shares in the Company were outstanding: Number of options to subscribe for unissued ordinary shares Balance at 1.4.2005/later Balance at Exercise Date of grant date of grant Cancelled Exercised 31.3.2006 price Exercisable...

  • Page 66
    REPORT BY THE BOARD OF DIRECTORS 5 Options on Shares in the Company (continued) (a) Singapore Airport Terminal Services Limited ("SATS") (continued) At the end of the financial year, options to take up 59,863,300 unissued shares in SATS were outstanding: Number of options to subscribe for unissued ...

  • Page 67
    ... THE BOARD OF DIRECTORS 6 Board Audit Committee The Board Audit Committee performed the functions specified in the Singapore Companies Act. The functions performed are detailed in the Report on Corporate Governance. Auditors The auditors, Ernst & Young, Certified Public Accountants, have expressed...

  • Page 68
    ...and Chew Choon Seng, being two of the directors of Singapore Airlines Limited, do hereby state that in the opinion of the directors: (i) the accompanying balance sheets, consolidated profit and loss account, statements of changes in equity, and consolidated cash ï¬,ow statements together with notes...

  • Page 69
    ... statements of Singapore Airlines Limited (the "Company") and its subsidiaries (collectively, the "Group") set out on pages 68 to 135 for the year ended 31 March 2006. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these...

  • Page 70
    CONSOLIDATED PROFIT AND LOSS ACCOUNT For the financial year ended 31 March 2006 (in $ million) The Group 2005-06 2004-05 R1 Notes REVENUE EXPENDITURE Staff costs Fuel costs Depreciation Impairment of fixed assets Amortisation of intangible assets Aircraft maintenance and overhaul costs Commission...

  • Page 71
    ....6 16.6 10.4 4,842.5 NET CURRENT ASSETS/(LIABILITIES) 1,095.8 18,527.0 R1 2005 figures have been restated for the effect of changes in accounting policies (see Note 3). The notes on pages 75 to 135 form an integral part of these financial statements. 69 Singapore Airlines Annual Report 05/06

  • Page 72
    ... financial year ended 31 March 2006 (in $ million) The Group Attributable to Equity Holders of the Company Foreign Capital currency Share-based Share Share redemption Capital translation compensation capital premium reserve reserve reserve reserve Notes Fair value reserve General reserve Total...

  • Page 73
    ... IN EQUITY For the financial year ended 31 March 2006 (in $ million) The Group Attributable to Equity Holders of the Company Foreign Capital currency Share Share redemption Capital translation Notes capital premium reserve reserve reserve Share-based compensation reserve General reserve Total...

  • Page 74
    ... OF CHANGES IN EQUITY For the financial year ended 31 March 2006 (in $ million) The Company Share capital Share premium Capital redemption reserve Share-based compensation reserve Fair value reserve General reserve Total equity Notes Balance at 31 March 2005, as previously reported Effect...

  • Page 75
    ...CHANGES IN EQUITY For the financial year ended 31 March 2006 (in $ million) The Company Share capital Share premium Capital redemption reserve Share-based compensation reserve General reserve Total equity Notes Balance at 31 March 2004, as previously reported... Singapore Airlines Annual Report 05/06

  • Page 76
    ... year ended 31 March 2006 (in $ million) The Group 2005-06 2004-05 R1 Notes NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure Purchase of intangible assets - application software Proceeds from disposal of aircraft and other fixed assets Return...

  • Page 77
    ... company of Temasek Holdings (Private) Limited, incorporated in the Republic of Singapore. The registered office of the Company is at Airline House, 25 Airline Road, Singapore 819829. The principal activities of the Group consist of passenger and cargo air transportation, airport terminal services...

  • Page 78
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2006 2 Accounting Policies (continued) (c) Significant accounting estimates (continued) (iii) Passenger revenue recognition Passenger sales are recognised as operating revenue when the transportation is provided. The value of unused tickets is included as ...

  • Page 79
    ... of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more...

  • Page 80
    ...straight-line method over their estimated useful lives of 1 - 5 years. (g) Foreign currencies The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services...

  • Page 81
    ... and loss account. (i) Depreciation of fixed assets Fixed assets are depreciated on a straight-line basis at rates which are calculated to write-down their cost to their estimated residual values at the end of their operational lives. Operational lives and residual values are reviewed annually in...

  • Page 82
    ...the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. Gains or losses arising from sale and operating leaseback of aircraft are...

  • Page 83
    ... gain or loss that has been recognised directly in equity is recognised in the profit and loss account. Gains and losses arising from derivative financial instruments on foreign currencies, interest rates and jet fuel are recognised at dates of maturity. 81 Singapore Airlines Annual Report 05/06

  • Page 84
    ...ned as cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash on hand, demand deposits and short-term deposits are classified and accounted for as loans and receivables under...

  • Page 85
    ... maintenance and overhaul expenses to meet contractual return conditions for sale and leaseback aircraft are accrued equally over the lease terms. (s) Employee benefits Equity compensation plans The Group has in place the Singapore Airlines Limited Employee Share Option Plan, the Singapore Airport...

  • Page 86
    ... of passengers, cargo and mail, the rendering of airport terminal services, engineering services, training of pilots, air charters and tour wholesaling and related activities. Revenue for the Group excludes dividends from subsidiary companies and inter-company transactions. Passenger and cargo sales...

  • Page 87
    ... sheet date. The fair value of jet fuel swap contracts is determined by reference to market values for similar instruments. The fair value of jet fuel option contracts is determined by reference to available market information and option valuation methodology. 85 Singapore Airlines Annual Report 05...

  • Page 88
    ... to profit and loss account. (ac) Segmental reporting Business segment The Group's businesses are organised and managed separately accordingly to the nature of the services provided. The significant business segments of the Group are airline operations, airport terminal services and engineering...

  • Page 89
    ...by $462.2 million and depreciation expenses has been increased by $82.3 million. As a result, the profit after tax of the Group for the financial year is higher by $303.9 million, and the basic and diluted earnings per share are both higher by 24.9 cents. 87 Singapore Airlines Annual Report 05/06

  • Page 90
    ...to the Group's accounting policies for reporting like transactions and other events in similar circumstances. The alignment of the different accounting policies has resulted in: Increased/(decreased) by $ million Profit for the financial year Fair value reserve as at 1 April 2005 General reserve as...

  • Page 91
    ... impact on the Group is as follows: Decreased by $ million Associated companies as at 31 March 2005 Foreign currency translation reserve as at 31 March 2005 Minority interest as at 31 March 2005 General reserve as at 31 March 2005 (7.1) (5.7) (1.1) (0.3) 89 Singapore Airlines Annual Report 05/06

  • Page 92
    ... segments for the financial years ended 31 March 2006 and 2005 and certain assets and liabilities information of the business segments as at those dates. Airline operations 2005-06 2004-05 Airport terminal services 2005-06 2004-05 TOTAL REVENUE External revenue Inter-segment revenue 12,659.1 43...

  • Page 93
    ...FINANCIAL STATEMENTS 31 March 2006 Engineering services 2005-06 2004-05 Others 2005-06 2004-05 Total of segments 2005-06 2004-05 Elimination* 2005-06 2004-05 Consolidated 2005... - 8.0 (0.1) (0.1) 1.3 12.5 203.7 49.5 (387.3) 1,403.7 1,352.4 51.3 1,403.7 91 Singapore Airlines Annual Report 05/06

  • Page 94
    ... 2006 4 Segment Information (in $ million) (continued) Business Segments Airline operations 2006 2005 Airport terminal services 2006 2005 OTHER INFORMATION AT 31 MARCH Segment assets Investments in and loans to joint venture and associated companies Goodwill on consolidation Long-term investments...

  • Page 95
    ...FINANCIAL STATEMENTS 31 March 2006 Engineering services 2006 2005 Others 2006 2005 Total of segments 2006 2005 Elimination* 2006 2005 Consolidated 2006 2005 941.9 371.2 - 14.6 - - - 1,327.7 224.2 2.0 1.0 - 47.5 274.7 39.6 2005... 1,165.8 - 42.8 (111.8) 93 Singapore Airlines Annual Report 05/06

  • Page 96
    ... table presents revenue information on airline operations by geographical areas for the financial years ended 31 March 2006 and 2005. By area of original sale 2005-06 2004-05 East Asia Europe South West Pacific Americas West Asia and Africa System-wide Non-scheduled services and incidental...

  • Page 97
    ... of operations Surplus on sale of investment in Air New Zealand Limited Surplus on sale of investment in Rafï¬,es Holdings Ltd Surplus on sale of investment in Taikoo (Xiamen) Aircraft Engineering Company Limited - - - - - (37.8) 45.7 32.6 9.0 49.5 95 Singapore Airlines Annual Report 05...

  • Page 98
    ...companies operate. A reconciliation between taxation expense and the product of accounting profit multiplied by the applicable tax rate for the years ended 31 March is as follows: The Group 2005... restated for the effect of adopting FRS 102 [see Note 3(d)]. 96 Singapore Airlines Annual Report 05/06

  • Page 99
    ... 121.9 487.6 121.9 426.4 The directors propose that a final tax exempt (one-tier) dividend of 35.0 cents per share (2004-05: 30.0 cents per share) amounting to $428.6 million (2004-05: $365.7 million) be paid for the financial year ended 31 March 2006. 97 Singapore Airlines Annual Report 05/06

  • Page 100
    ...and will carry equal voting rights as those of ordinary shares. These shares will be issued only when the directors determine that the Company's operating rights under any of the ASAs are threatened by reason of the nationality of the majority shareholders. 98 Singapore Airlines Annual Report 05/06

  • Page 101
    ... of the closing prices of the respective companies' ordinary shares on the SGX-ST for the five market days immediately preceding the date of grant. Under the Employee Share Option Schemes, options will vest two years after the date of grant. Under the Senior Executive Share Option Schemes, options...

  • Page 102
    ...2013 30.6.2014 30.6.2015 (705,700) (18,053,650) 59,863,300 The weighted average fair value of options granted during the year was $0.48 (2004-05: $0.49). The weighted average share price for options exercised during the year was $2.30 (2004-05: $2.08). 100 Singapore Airlines Annual Report 05/06

  • Page 103
    ....6.2012 30.6.2013 30.6.2014 30.6.2015 (416,850) (19,381,050) The weighted average fair value of options granted during the year was $0.49 (2004-05: $0.53). The weighted average share price for options exercised during the year was $2.58 (2004-05: $2.10). 101 Singapore Airlines Annual Report 05/06

  • Page 104
    ... terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the July 2005 and July 2004 grants: SIA ESOP Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Exercise price ($) Share...

  • Page 105
    ...employees who have completed their fixed term contracts during the financial year. The said options, if unvested, shall immediately vest and be exercisable from the date of cessation of employment to the date falling one year from the date of cessation of employment. 103 Singapore Airlines Annual...

  • Page 106
    ... reason approved in writing by the Remuneration Committee. The said options are exercisable up to the expiration of the applicable exercise period or the period of five years from the date of retirement or cessation of employment, whichever is earlier. 104 Singapore Airlines Annual Report 05/06

  • Page 107
    ... approved in writing by the Compensation and HR Committee. The said options are exercisable up to the expiration of the applicable exercise period or the period of five years from the date of retirement or cessation of employment, whichever is earlier. 105 Singapore Airlines Annual Report 05/06

  • Page 108
    ... to employees. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled share options. The Group 31 March 2006 2005 The Company 31 March 2006 2005 Balance at 1 April as previously reported Effect of adopting FRS 102 Opening balance...

  • Page 109
    ...Group Consolidated Consolidated balance sheet profit and loss 31 March 2006 2005 2005-06 2004-05 The Company Balance sheet 31 March 2006 2005 The deferred taxation arises as a result of: Deferred tax liabilities Differences in depreciation Revaluation of jet fuel swap/option contracts to fair value...

  • Page 110
    ...with interest rates ranging from 2.30% to 4.42% (2004-05: 1.37% to 2.57%) per annum. The Group 31 March 2006 2005 Not later than one year Later than one year but not later than five years Later than five years 16.6 56.0 68.1 140.7 25.6 57.9 84.3 167.8 108 Singapore Airlines Annual Report 05/06

  • Page 111
    ...leased to Singapore Airlines Cargo Pte Ltd ("SIA Cargo") in 2001-02, as part of Cargo Division's corporatisation. Both finance leases mature in 2007 without any options for renewal. The leases have options for the Company to purchase the aircraft at the end of the lease period of 12.5 years. One of...

  • Page 112
    ... and impairment Aircraft Aircraft spares Aircraft spare engines Freehold land and buildings Leasehold land and buildings Plant and equipment Office and computer equipment 5,672.2 603.8 176.6 127.8 561.5 774.9 374.6 8,291.4 Net book value 15,037.3 110 Singapore Airlines Annual Report 05/06

  • Page 113
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2006 18 Fixed Assets (in $ million) (continued) The Group (continued) Net Book Value 31 March 06 31 March 05 Aircraft Aircraft spares Aircraft spare engines Freehold land and buildings Leasehold land and buildings Plant and equipment Office and computer ...

  • Page 114
    ...and buildings Leasehold land and buildings Plant and equipment Office and computer equipment 8,694.6 248.0 208.3 94.6 202.4 68.2 22.9 9,539.0 1,955.4 11,494.4 9,000.2 230.9 253.7 102.7 213.4 94.8 37.1 9,932.8 1,187.0 11,119.8 Advance and progress payments 112 Singapore Airlines Annual Report 05...

  • Page 115
    ... equipment and building projects. Assets pledged as security In addition to assets held under finance leases, the following assets are mortgaged under bank loans: The Group 31 March 2006 2005 Net book value of: - aircraft - building 213.7 5.4 227.3 5.5 113 Singapore Airlines Annual Report 05/06

  • Page 116
    ... software The Group 31 March 2006 2005 The Company 31 March 2006 2005 Balance at 1 April Additions Disposals Amortisation Balance at 31 March 142.8 32.4 (0.1) (54.7) 120.4 185.6 - - (42.8) 142.8 88.3 25.1 (0.1) (36.1) 77.2 117.4 - - (29.1) 88.3 Cost Accumulated amortisation Net book value 328...

  • Page 117
    ... Dollar funds, 1.98% per annum for Euro funds (2004-05: 2.10% to 2.11%) and 4.61% per annum for UK Sterling Pound funds (2004-05: 4.70% to 4.90%). Amounts owing to/by subsidiary companies are unsecured, trade-related, interest-free and are repayable on demand. 115 Singapore Airlines Annual Report...

  • Page 118
    ... Cargo Community (Shanghai) Co Ltd SilkAir (Singapore) Private Limited Tradewinds Tours & Travel Private Limited Singapore Aviation and General Insurance Company (Pte) Limited SIA Properties (Pte) Ltd Singapore Flying College Pte Ltd Sing-Bi Funds Private Limited Singapore Airport Duty-Free Emporium...

  • Page 119
    ... over the useful life. The amortisation is included in the line of "share of profits of associated companies" in the consolidated profit and loss account. R1 2005 figures have been restated for the effect of changes in accounting policies (see Note 3). 117 Singapore Airlines Annual Report 05/06

  • Page 120
    ... 2005 Percentage of equity held by the Group 2006 2005 Principal activities Service Quality (SQ) Centre Pte Ltd @ Virgin Atlantic Limited* ++ Tiger Airways Pte Ltd @ Asia Leasing Limited + RCMS Properties Private Limited + AVISERV Ltd TAJ SATS Air Catering Limited ** SERVAIR-SATS Holding Company...

  • Page 121
    ... - do Asia Pte Ltd + for aircraft engines and airframe application PT JAS Aero-Engineering Operation of aircraft maintenance Indonesia Services + facilities PT Purosani Sri Persada Hotel ownership and management - do Great Wall Airlines Company Air cargo transportation People's Republic Limited + of...

  • Page 122
    ... (unquoted, at cost) Share of post-acquisition reserves - general reserve - foreign currency translation reserve - fair value reserve - capital reserve 215.8 136.1 (2.4) 2.8 10.3 362.6 207.6 102.4 3.8 - 9.8 323.6 159.1 - - - - 159.1 151.0 - - - - 151.0 120 Singapore Airlines Annual Report 05/06

  • Page 123
    ... of business Cost (in $ million) 2006 2005 Percentage of equity held by the Group 2006 2005 Principal activities Singapore Aircraft Leasing Enterprise Pte Ltd* International Engine Component Overhaul Pte Ltd* Singapore Aero Engine Services Private Limited* * Audited by Ernst & Young, Singapore...

  • Page 124
    ... annual interest rate of 3.97% (2004-05: 1.71%). During the financial year, the Group and the Company recorded an impairment loss in the profit and loss account of $1.0 million (2004-05: $0.1 million) pertaining to unquoted equity investments. In the previous financial year, the Group's long-term...

  • Page 125
    ... 2006 2005 The Company 31 March 2006 2005 Technical stocks and stores Catering and general stocks Work-in-progress Total inventories at lower of cost and net realisable value 472.8 26.1 18.6 517.5 375.0 26.9 40.6 442.5 441.5 17.0 - 458.5 350.4 18.4 - 368.8 During the financial year, the Group...

  • Page 126
    ... between one day and three months depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates. The weighted average effective interest rate of short-term deposits is 3.6% (2004-05: 2.5%) per annum. 124 Singapore Airlines Annual Report 05...

  • Page 127
    ... is charged at a rate of 3.95% (2004-05: 5.25%) per annum in the current financial year. As at 31 March 2006, the composition of bank overdraft held in foreign currencies by the Group is as follows: USD - 22.3% (2005: 28.1%) and EUR - 20.5% (2005: 26.1%). 125 Singapore Airlines Annual Report 05/06

  • Page 128
    ...es Holdings Ltd Surplus on sale of investment in Taikoo (Xiamen) Aircraft Engineering Company Limited Operating profit before working capital changes Increase in creditors (Increase)/decrease in short-term investments Increase in sales in advance of carriage Increase in debtors Increase in stocks...

  • Page 129
    ...allowed under all the lease arrangements. Singapore Airlines Cargo Pte Ltd ("SIA Cargo") has three B747-400F aircraft under operating lease with fixed rental rates. The lease terms range from 10 to 11 years. In one of the aircraft lease agreements, SIA Cargo holds the option to extend the lease for...

  • Page 130
    ... under non-cancellable operating leases are as follows: The Group 31 March 2006 2005 The Company 31 March 2006 2005 Not later than one year Later than one year but not later than five years 14.4 19.3 33.7 34.7 35.7 70.4 0.8 - 0.8 20.8 29.9 50.7 128 Singapore Airlines Annual Report 05/06

  • Page 131
    ... There are contingent liabilities in respect of insurance and performance bonds, and bank guarantees given by the Group and the Company at 31 March 2006 amounting to $58.9 million (2005: $56.4 million) and $22.6 million (2005: $22.8 million) respectively. 129 Singapore Airlines Annual Report 05/06

  • Page 132
    ...Financial Risk Management Objectives and Policies The Group operates globally and generates revenue in various currencies. The Group's airline operations carry certain financial and commodity risks, including the effects of changes in jet fuel prices, foreign currency exchange rates, interest rates...

  • Page 133
    ... price. The continuously compounded risk-free rate estimated as average of the past 12 months SGS benchmark issues' one-year yield (2005-06: 2.4%) was also applied to each individual jet fuel swap and jet fuel option contracts to derive their estimated fair values as at 31 March 2006. The fair value...

  • Page 134
    ... earlier of contractual repricing or maturity dates, of the Group's and Company's financial instruments that are exposed to interest rate risk: Within 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Total 2006 Group Fixed rate Bonds Bank overdrafts Notes payable Obligations under...

  • Page 135
    ...14(b)] in respect of these contracts. The cash ï¬,ows arising from these derivatives are expected to occur and enter into the determination of profit or loss during the next three financial years as follows: $55.0 million, $24.5 million and $2.7 million. 133 Singapore Airlines Annual Report 05/06

  • Page 136
    ... cross currency swaps were assessed to be highly effective and at 31 March 2006, a net fair value loss of $0.3 million, with a related deferred tax charge of $0.1 million, was included in the fair value reserve [Note 14(b)] in respect of these contracts. 134 Singapore Airlines Annual Report 05/06

  • Page 137
    ... 2005. The Company had, on 2 May 2006, announced that it has sold, then leased back, on an operating lease basis, three Boeing 777-300 aircraft. The aircraft are each leased to the Company for approximately seven-and-a-half years, including options to extend. 135 Singapore Airlines Annual Report...

  • Page 138
    ...2005-06 $ million Singapore Petroleum Company Ltd Keppel Telecommunications & Transportation Ltd Group Asia Airfreight Terminal Company Ltd Temasek Holdings (Private) Limited Group Senoko Energy Supply Pte Ltd Trusted Hub Ltd PT Bank Internasional Indonesia PT Bank Danamon Indonesia MediaCorp Press...

  • Page 139
    ... OF THE COMPANY 2005-06 ($ million) 2004-05 ($ million) 234.6 254.7 343.2 346.4 396.6 464.6 266.3 286.7 1,240.7 1,352.4 EARNINGS (AFTER TAXATION) PER SHARE - BASIC 2005-06 (cents) 2004-05 (cents) 19.3 20.9 28.2 28.4 32.5 38.1 21.8 23.5 101.7 111.0 137 Singapore Airlines Annual Report 05...

  • Page 140
    ... OF THE GROUP 2005-06 2004-05 2003-04 2002-03 2001-02 PROFIT AND LOSS ACCOUNT ($ million) Total revenue Total expenditure Operating profit Finance charges Interest income Surplus on disposal of aircraft, spares and spare engines Surplus on disposal of other fixed assets Dividend from long-term...

  • Page 141
    ...' funds. Return on total assets is the profit after tax expressed as a percentage of the average total assets. Return on turnover is the profit after tax expressed as a percentage of the total revenue. Based on average staff strength. R2 R3 R4 R5 R6 R7 139 Singapore Airlines Annual Report 05...

  • Page 142
    ...-YEAR STATISTICAL RECORD 2005-06 2004-05 2003-04 SIA FINANCIAL R1 Total revenue Total expenditure Operating profit Profit before taxation Profit after taxation Capital disbursements R2 Passenger - yield - unit cost - breakeven load factor OPERATING PASSENGER FLEET Aircraft Average age PASSENGER...

  • Page 143
    TEN-YEAR STATISTICAL RECORD 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97 8,047.0 7,838.0 209.0 460.1 618.0 2,766.2 9.1 6.7 73...765.5 15,651.8 68.8 63.7 42.6 66.9 10,037.6 14,533.9 69.1 67.2 43.8 65.2 9,512.0 13,501.1 70.5 66.5 43.8 65.9 141 Singapore Airlines Annual Report 05/06

  • Page 144
    ... charts for 2000-01 and prior years show the combined results of both passenger and cargo operations. The numbers for 2001-02 include cargo operations for the first three months only (April to June 2001). Source: Avsoft Information Systems, Ruby, England. 142 Singapore Airlines Annual Report 05/06

  • Page 145
    ... 6y0m 1 5 1 2 3 35 2 30 2 N.A. not applicable R1 The standard seat configuration for the B777-300ER and A380-800 aircraft ï¬,eet is to be finalised at a later date. Orders for three B747-400 passenger-to-freighter conversion from SIA to SIA Cargo. R2 143 Singapore Airlines Annual Report 05/06

  • Page 146
    GROUP CORPORATE STRUCTURE At 31 March 2006 Singapore Airlines Limited 83.2% Singapore Airport Terminal Services Limited 100% SilkAir (Singapore) Private Limited 56% Abacus Travel Systems Pte Ltd 83.9% SIA Engineering Company Limited 100% Singapore Aviation and General Insurance Company (Pte) ...

  • Page 147
    ...Services Corporation 24% Singapore Airport Duty-Free Emporium 20% Evergreen Airline Services Corporation 20% MacroAsia-Eurest Catering Services Inc. 100% SIAEC Global Pte Ltd 65% Singapore Jamco Private Limited 51% Aviation Partnership (Phillipines) Corporation 145 Singapore Airlines Annual Report...

  • Page 148
    ... in Issue Class of Shares Voting Rights Range of shareholdings 1,225,771,659 Ordinary shares One special share held by the Minister for Finance (Incorporated) 1 vote per share Number of shareholders % Number of shares % 1 - 999 1,000 - 10,000 10,001 - 1,000,000 1,000,001 and above Total 3,184 16...

  • Page 149
    INFORMATION ON SHAREHOLDINGS As at 30 May 2006 Major shareholders Number of shares % 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Temasek Holdings (Private) Limited DBS Nominees Pte Ltd HSBC (Singapore) Nominees Pte Ltd DBSN Services Pte Ltd Citibank Nominees Singapore Pte Ltd Rafï¬,es ...

  • Page 150
    ... R2 R1 14.90 11.10 14.00 12.70 9.40 11.90 13.77 1.27 6.73 10.72 1.17 5.67 Based on closing price on 31 March and Group numbers. Cash earnings is defined as profit attributable to equity holders of the Company plus depreciation and amortisation. R2 148 Singapore Airlines Annual Report 05/06

  • Page 151
    ...dividend of 35 cents per ordinary share for the year ended 31 March 2006. 3. To re-appoint Sir Brian Pitman, a Director who will retire under Section 153(6) of the Companies Act, Cap 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting of the Company...

  • Page 152
    NOTICE OF ANNUAL GENERAL MEETING Special Business (continued) 8.1 (2) (subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited ("SGX-ST")) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) ...

  • Page 153
    ... March 2006, for services rendered by Directors on the Board as well as on various Board Committees. The fee structure (disclosed in the Corporate Governance Report in the Annual Report) remains the same as FY2004/05. 5. Ordinary Resolution No. 8.1, if passed, will empower Directors to issue shares...

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