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ANNUAL REPORT
2006-07

Table of contents

  • Page 1
    ANNUAL REPORT 2006-07

  • Page 2
    ... new cabin products made their debut on the Boeing 777-300ER; nine of which were delivered during the year. The Group maintained its disciplined approach towards the management of costs, further rationalising some business processes, to remain lean and effective. Looking forward, Singapore Airlines...

  • Page 3
    ... In Review Network Fleet Feature: Product And Services Awards And Accolades Safety And Security Supporting Our Communities Developing Our People Feature: Environment Feature: Singapore Airlines Turns 60 Subsidiaries List Of Awards Statement On Risk Management Corporate Governance Report Financials...

  • Page 4
    ...) - diluted R5 Net asset value ($) R6 Dividends Interim dividend (cents per share) Proposed final dividend (cents per share) Proposed special dividend (cents per share) Dividend cover (times) R7 Company Financial Results ($ million) Total revenue Total expenditure Operating profit Profit before...

  • Page 5
    ... yield (cents/ltk) Overall unit cost (cents/ctk) Overall breakeven load factor (%) Employee Productivity (Average) - Company Average number of employees Seat capacity per employee (seat-km) Passenger load per employee (tonne-km) R1 Revenue per employee ($) Value added per employee ($) Employee...

  • Page 6
    BOARD OF DIRECTORS From left to right: Stephen Lee Ching Yen; Chew Choon Seng; Chia Pei-Yuan; Euleen Goh Yiu Kiang; David Michael Gonski; Ho Kwon Ping; James Koh Cher Siang; Sir Brian Pitman; Davinder Singh Singapore Airlines 4 Annual Report 2006-07

  • Page 7
    Singapore Airlines 5 Annual Report 2006-07

  • Page 8
    ... management positions in Standard Chartered Bank before retiring as Chief Executive Officer in January 2007, after more than 20 years service. She was awarded a Public Service Medal for her contributions to the Financial Services sector in 2006. Age 52. CHEW CHOON SENG Director and Chief Executive...

  • Page 9
    ...of the New Singapore Shares Fund between October 2001 and June 2005, and Chairman of the Public Accountants Board between April 1997 and March 2004. In 2002, Mr Koh was awarded the Meritorious Service Medal for his outstanding contributions to the public sector. Age 61. Appointed Director on 15 July...

  • Page 10
    ... Airlines Group's 2006-07 Annual Report and Summary Financial Statements to shareholders. 2006-07 was an especially good year for Singapore Airlines. A very healthy financial result at the end of the year enabled the Board to review the Group's capital structure and we have recommended returning...

  • Page 11
    ... in South-east Asia. The achievement of good results and improvements in the operating performance of the Group required concerted effort from all the staff across the Airline, as well as the subsidiary companies. A lot of effort was undertaken during the year to build stronger working relationships...

  • Page 12
    ... Fock Siew Wah (until 31 July 2006) SHARE REGISTRAR M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore 068906 AUDITORS Ernst & Young Certified Public Accountants One Rafï¬,es Quay North Tower #18-01 Singapore 048583 AUDIT PARTNER Kevin Kwok (appointed since FY...

  • Page 13
    ...31 October 2007 Announcement of 2007-08 Second Quarter and Half Year Results Chin Yau Seng (from 26 March 2007) Senior Vice President Special Projects Thoeng Tjhoen Onn Senior Vice President Europe Chief Executive SilkAir (Singapore) Private Limited Singapore Airlines 11 Annual Report 2006-07

  • Page 14
    ... to Los Angeles, San Francisco and Dubai. NOVEMBER 2006 • The Airline took delivery of its first B777-300ER at a ceremonial event in Seattle. OCTOBER 2006 • The Airline launched its new suite of cabin products and services including the new First, Business and Economy Class seats, and the next...

  • Page 15
    ... new orders will cater to the Airline's regional, medium and long-haul growth while adhering to the Airline's policy of operating a young and modern ï¬,eet. The year in review also marked a significant milestone in the Airline's history with the launch of its new generation cabin products, raising...

  • Page 16
    OPERATING REVIEW Network The Airline expanded its network to Europe by adding a three-times-weekly service to Milan and Barcelona in July 2006. As part of South African network restructuring, the Airline began a non-stop three-times-weekly service between Singapore and Cape Town in February 2007. ...

  • Page 17

  • Page 18
    ...$12 billion, and position Singapore Airlines as a leading customer for new aircraft types being developed and offered by Airbus and Boeing. Delays to the initial deliveries of the A380s constrained capacity growth during the year in review. The scheduled delivery of the first A380 in December 2006...

  • Page 19
    Photography by Sim Kok Chwee

  • Page 20
    ... travel. The Airline unveiled its new cabin products to the world in October 2006. The products are featured in the new Boeing 777-300ER aircraft which, by the end of the year in review, were ï¬,ying to Paris, Milan, Barcelona, Zurich, Frankfurt, San Francisco via Seoul, and Hong Kong. More routes...

  • Page 21

  • Page 22
    ...the forward-facing 1-2-1-cabin configuration. The 76-cm wide Business Class seat has a fixed back shell and comes with well-positioned reading lights, in-seat laptop power supply, and USB ports. A suite of office applications on KrisWorld, viewed on the 39-cm screen, gives the customer his or her...

  • Page 23
    ... new partners include HSBC (India and Philippines), HSBC Philippines Wealth Management, OCBC (Singapore and Malaysia), Diners Club Australia, ICICI Bank, American Express (USA) and New Otani Hotels. Internet Check-in Customers can now check-in online, choose their preferred seats and print their...

  • Page 24
    ... voted Singapore Airlines the Most Transparent Company in the Transport/Storage/Communications category for the second year running. The Airline was also named joint winner in the Big Caps category, open only to companies with a capitalisation of at least $1 billion. A full list of awards achieved...

  • Page 25
    ...safety organisations. The Airline works closely with regulators and industry bodies to review and raise awareness of accident prevention strategies across all areas of the business. Supporting Our Communities During the year in review, Singapore Airlines contributed over $1 million in cash and free...

  • Page 26
    ... for implementation include support for re-employment of older workers whenever possible; enhancing worker employability through skills training and upgrading; enhancing career management of cabin crew; moving towards best sourcing for functions already Singapore Airlines 24 Annual Report 2006-07

  • Page 27
    ... for the year. The Company continued its relentless efforts to drive productivity higher and foster a vibrant workplace culture through developing and investing in employees. Staff from Cabin Crew, Flight Operations and Marketing are better equipped to serve customers and perform their duties with...

  • Page 28
    ... management providers, with ï¬,ight paths zig-zagging across the continent. The United States has one. Singapore Airlines remains committed to improving its environmental performance, year on year, year after year. The Airline adheres to its policy of operating a young and modern ï¬,eet of aircraft...

  • Page 29
    ... practices and develop efficiencies, which reduce fuel consumption and emissions. During the year, the Airline led a number of IATA working groups in the region which pursued airspace reforms, by opening more direct ï¬,ight paths. The benefits of these reforms do not accrue to Singapore Airlines...

  • Page 30
    ... in many other companies. Airline was the first to offer free headsets, choice of meals and free drinks in Economy Class, provide inï¬,ight entertainment across all classes, and involve a panel of international chefs in the creation of inï¬,ight meals. Singapore Airlines 28 Annual Report 2006-07

  • Page 31

  • Page 32
    ... to equity holders of $242 million in the financial year ending 31 March 2007. In July 2006, SIAEC signed a memorandum of understanding with the Wadia Group of India to form a Joint Venture Company to offer maintenance, repair and overhaul services in India. Singapore Airlines 30 Annual Report...

  • Page 33
    ... the year, the company continued to secure new customers for its airframe, component, line maintenance and ï¬,eet management programme business. Singapore Airlines Cargo Singapore Airlines Cargo (SIA Cargo) made a profit of $31 million during the year in review. In May 2006, SIA Cargo expanded...

  • Page 34
    ... Airline' for the seventh time in 2006 by readers of Asia Pacific's leading travel publication TTG Asia. It was also the only regional airline to be featured in the top ten of Travel + Leisure's 'World's Best Airlines' list for the second consecutive year. Singapore Airlines 32 Annual Report...

  • Page 35
    ... Business Class • Best Economy Class SmartTravel Asia, Best in Travel 2006 • World's Best Cabin Service Securities Investors Association (Singapore) SIAS 7th Investors' Choice Awards 2006 (2nd consecutive year) Transport/Storage/Communications Category • Most Transparent Company Award 2006 Big...

  • Page 36
    ... dedicated "CSA Unit" was created to drive the "controls self-assessment" program to ensure that company policies and procedures are complied with. 4. BOARD OF DIRECTORS' COMMENTS ON THE PRACTICE OF RISK MANAGEMENT IN SINGAPORE AIRLINES Having reviewed the risk management practices and activities of...

  • Page 37
    ... of power and authority within the Company. The Chairman leads the Board and is responsible for its workings and proceedings, while the CEO is responsible for implementing the Company's business strategies and policies, and the conduct of its business. Singapore Airlines 35 Annual Report 2006...

  • Page 38
    ... Board met 4 times in the financial year. The meetings included reviews of Management's performance in meeting goals and objectives. The Board holds separate Strategy Sessions to assist Management in developing its plans and strategies for the future. The non-executive Directors also set aside time...

  • Page 39
    ..., updates on business development, monthly management accounts, and productivity and performance indicators, as well as matters for the decision or information of the Board. Directors have separate and independent access to Senior Management and the Company Secretary at all times. Directors can seek...

  • Page 40
    ... met under the respective share plans. Director's fees were retained by the Company. No employee of the Group who is an immediate family member of a Director was paid a remuneration that exceeded $150,000 during the financial year ended 31 March 2007. Singapore Airlines 38 Annual Report 2006-07

  • Page 41
    ...performance and achieve sustainable growth for the Company in the changing business environment, and to foster a greater ownership culture amongst key senior management and senior executives. These plans contemplate the award of fully paid Shares, when and after pre-determined performance or service...

  • Page 42
    ...'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 securities by Directors and employees, as recommended by the SGX-ST's Best Practices Guide. The Company imposes a trading...

  • Page 43
    ..., the various Divisions within the Company have developed a Control Self Assessment programme, where operating departments' management review and report on the adequacy of their respective units' control environment to the AC annually. It is the opinion of the Board that, in the absence of...

  • Page 44
    ...SINGAPORE AIRLINES LIMITED BOARD OF DIRECTORS AND BOARD COMMITTEE MEMBERS For the period 1 April 2006 to 31 March 2007 Name of Director Board Board Executive Board Audit Board Board Safety and Risk...Yen 4 4 5 5 -* - 3 3 - - (Note 1 Chew Choon Seng Chia Pei-Yuan 4 4 4 3 5 - 5 - - 4...

  • Page 45
    ...3 years Company Title 1. PSA Corporation Limited 2. PSA International Pte Ltd Chairman Advisor & Chairman CHEW CHOON SENG Academic and Professional Qualifications: - - Bachelor of Engineering (lst Class Hons) University of Singapore Master of Science in Operations Research and Management Studies...

  • Page 46
    ... Pte Ltd Drew & Napier LLC DrewCorp Services Pte Ltd Petra Foods Limited Managing Director CEO & Director Director Director Directorships for the past 3 years Company Title 1. Singapore Technologies Pte Ltd 2. Zagro Asia Limited Director Director Singapore Airlines 44 Annual Report 2006-07

  • Page 47
    ... 140 Five-Year Financial Summary Of The Group 142 Ten-Year Statistical Record 144 Ten-Year Charts 145 The Group Fleet Profile 146 Group Corporate Structure 148 Information On Shareholdings 150 Share Price And Turnover 151 Notice Of Annual General Meeting Singapore Airlines 45 Annual Report 2006...

  • Page 48
    ...71.6 per cent) Basic earnings per share 172.6 cents (+69.7 per cent) Equity attributable to equity holders of the Company $15,100 million (+12.1 per cent) Net asset value $12.11 per share (+10.1 per cent) Total debt equity ratio 0.12 times (-0.05 times) Singapore Airlines 46 Annual Report 2006-07

  • Page 49
    ... on the year before. The number of passengers carried for the full year at 18.346 million was the highest achieved in the Company's history. Underpinned by the strong growth in carriage for passenger operations, passenger yield improved 2.8 per cent. However, Group expenditure also increased, rising...

  • Page 50
    ... 2007, mainly attributable to profit for the financial year, partially offset by payment of final dividend of 35 cents per share in respect of financial year 2005-06 and interim dividend of 15 cents per share in respect of financial year 2006-07. Singapore Airlines 48 Annual Report 2006-07

  • Page 51
    ... result of stronger operations and monetisation of the Group's non-core assets. Total debt to equity ratio improved 0.05 times to 0.12 times. For the financial year ended 31 March 2007, the Board recommends a total distribution of 100 cents per share (+122.2 per cent), representing a dividend cover...

  • Page 52
    ... generated cash ï¬,ow was driven primarily by higher proceeds from disposal of aircraft and other assets and higher cash generated from operations. About 98 per cent of the capital spending was on aircraft, together with spare engines and components. Singapore Airlines 50 Annual Report 2006...

  • Page 53
    ... Dividends from long-term investments, gross Other non-operating items Share of profits of joint venture companies Share of profits/(losses) of associated companies Surplus on sale of SIA Building Surplus on sale of investment in Singapore Aircraft Leasing Enterprise Pte Ltd Staff compensation...

  • Page 54
    FINANCIAL REVIEW Performance of the Group (continued) Value Added Total value added for 2006-07 improved 17.6 per cent (+$976 million) to $6,510 million. The increase was mainly attributable to higher revenue (+$1,153 million), surplus on sale of SIA Building and sale of investment in Singapore ...

  • Page 55
    FINANCIAL REVIEW Performance of the Group (continued) Group Average Staff Strength and Productivity The Group's average staff strength increased by 567 to 29,125 employees. A breakdown is as follows: 2006-07 2005-06 % Change Singapore Airlines SATS Group SIAEC Group SIA Cargo SilkAir Others ...

  • Page 56
    ... points to 6.7 percentage points in 2006-07. A review of the Company's operating performance by route region is as follows: By Route Region R1 (2006-07 against 2005-06) Revenue Passengers Carried Passenger KM Available Seat KM Change (thousand) % Change % Change East Asia Americas Europe South...

  • Page 57
    FINANCIAL REVIEW Performance of the Company (continued) Operating Performance (continued) Passenger Load Factor (%) Change 2006-07 2005-06 % points East Asia Americas Europe South West Pacific West Asia and Africa Systemwide 74.4 82.2 83.5 81.5 72.5 79.2 70.8 80.7 78.7 75.7 70.5 75.6 + + ...

  • Page 58
    ...REVIEW Performance of the Company (continued) Revenue The Company's revenue increased 10.1 per cent to $11,344 million as follows: 2006-07 2005-06 $ million $ million % Change Passenger revenue Excess baggage revenue Non-scheduled services Bellyhold revenue from SIA Cargo Direct operating revenue...

  • Page 59
    FINANCIAL REVIEW Performance of the Company (continued) Revenue (continued) A breakdown of passenger revenue R1 by route region and area of original sale is shown below: By Route Region ($ million) By Area of Original Sale R2 ($ million) 2006-07 2005-06 % Change 2006-07 2005-06 % Change East Asia...

  • Page 60
    ...as meal and nightstop allowances), arising from an increase in capacity of 2.8 per cent (in terms of available seat kilometres), and (iii) higher average staff strength (+118) this year. Depreciation charges increased $47 million mainly due to (i) the commissioning of nine B777-300ER aircraft during...

  • Page 61
    ... B777-300ER aircraft and decommissioning of some of the older B747-400 aircraft. A change in fuel productivity (passenger aircraft) of 1.0 per cent would impact the Company's annual fuel cost by about $37 million, before accounting for changes in fuel price, USD exchange rate and ï¬,ying operations...

  • Page 62
    ...West Asia and Africa Americas 11,613 945 419 369 263 238 11,452 974 435 370 256 242 1.4 3.0 3.7 0.3 2.7 1.7 0.9 13,847 13,729 The Company's average staff productivity ratios are shown below: 2006-07 2005-06 % Change Seat capacity per employee (seat-km) Passenger load carried per...

  • Page 63
    ... Company Limited ("SIAEC"), Singapore Airlines Cargo Pte Ltd ("SIA Cargo") and SilkAir (Singapore) Private Limited ("SilkAir"). The following performance review includes intra-group transactions. Singapore Airport Terminal Services Group 2006-07 2005-06 Change $ million $ million Total revenue...

  • Page 64
    .... Return on equity holders' funds decreased marginally by 0.5 percentage point from 24.3 per cent in 2005-06 to 23.8 per cent this year. Basic earnings per share rose 0.5 cents (+2.2 per cent) to 23.0 cents. Singapore Airlines Cargo 2006-07 2005-06 Change $ million $ million Total revenue Total...

  • Page 65
    ... points to 59.4 per cent. Equity holders' funds of SilkAir was $396 million (+5.0 per cent) as at 31 March 2007. Capital expenditure for the year was $100 million, mainly for delivery payment for one A320-200 aircraft, pre-delivery payments for one A319-100 and one A320-200 aircraft scheduled...

  • Page 66
    .../ date of date of Name of Director appointment 31.3.2007 appointment 31.3.2007 3 Interest in Singapore Airlines Limited Ordinary shares Stephen Lee Ching Yen Chew Choon Seng Euleen Goh Yiu Kiang James Koh Cher Siang Options to subscribe for ordinary shares Chew Choon Seng Conditional award of...

  • Page 67
    ...2006/ 1.4.2006/ date of date of Name of Director appointment 31.3.2007 appointment 31.3.2007 Interest in Singapore Airport Terminal Services Limited Ordinary shares Chew Choon Seng Interest in Singapore Telecommunications Limited Ordinary shares Stephen Lee Ching Yen Chew Choon Seng Euleen Goh...

  • Page 68
    ... 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 Senior Executive...

  • Page 69
    ... financial year Name of participant under review under review under review under review lapsed under review Chew Choon Seng 120,000 $12.60 1,194,000 - - 1,194,000 The particulars of options on shares in subsidiary companies are as follows: (a) Singapore Airport Terminal Services Limited...

  • Page 70
    REPORT BY THE BOARD OF DIRECTORS 5 Options on Shares in the Company (continued) (i) Employee Share Option Plan (continued) (b) SIA Engineering Company Limited ("SIAEC") (continued) At the end of the financial year, options to take up 49,731,288 unissued shares in SIAEC were outstanding: Number of ...

  • Page 71
    ... directors of the Company: Aggregate awards Aggregate Conditional granted since awards awards commencement not released granted during of plans to end at end of financial year of financial year financial year Name of participant under review under review under review RSP Chew Choon Seng PSP Chew...

  • Page 72
    ... The auditors, Ernst & Young, Certified Public Accountants, have expressed their willingness to accept re-appointment. 7 On behalf of the Board, STEPHEN LEE CHING YEN Chairman CHEW CHOON SENG Chief Executive Officer Dated this 11th day of May 2007 Singapore Airlines 70 Annual Report 2006-07

  • Page 73
    ... Yen 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...

  • Page 74
    ...Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2007 and the results, changes in equity and cash ï¬,ows of the Group and the changes in equity of the Company for the year ended on that date; and...

  • Page 75
    ... assets Aircraft maintenance and overhaul costs Commission and incentives Landing, parking and overï¬,ying charges Handling charges Rentals on leased aircraft Material costs Inï¬,ight meals Advertising and sales costs Insurance expenses Company accommodation and utilities Other passenger costs Crew...

  • Page 76
    ...ASSETS SUBSIDIARY COMPANIES ASSOCIATED COMPANIES JOINT VENTURE COMPANIES LONG-TERM INVESTMENTS OTHER RECEIVABLES CURRENT ASSETS Section 44 tax prepayments Stocks Trade debtors Amounts owing by subsidiary companies Amounts owing by associated companies Loan-receivable within one year Investments Cash...

  • Page 77
    STATEMENTS OF CHANGES IN EQUITY For the financial year ended 31 March 2007 (in $ million) The Group Attributable to Equity Holders of the Company Foreign currency Share-based Share Capital translation compensation Fair value General Minority Total Notes capital reserve reserve reserve reserve ...

  • Page 78
    ...capital reserve reserve reserve reserve reserve Total interests equity Balance at 1 April 2005 Currency translation differences Net fair value changes on available-for-sale assets Net fair value changes on cash ï¬,ow hedges Share of joint venture and associated companies' fair value reserve Share...

  • Page 79
    ... OF CHANGES IN EQUITY For the financial year ended 31 March 2007 (in $ million) The Company Share-based Share compensation Fair value General Notes capital reserve reserve reserve Total Balance at 1 April 2006 Net fair value changes on available-for-sale assets Net fair value changes on cash...

  • Page 80
    ... OF CHANGES IN EQUITY For the financial year ended 31 March 2007 (in $ million) The Company Share-based Share compensation Fair value General Notes capital reserve reserve reserve Total Balance at 1 April 2005 Net fair value changes on available-for-sale assets Net fair value changes on cash...

  • Page 81
    ... of long-term lease liabilities Proceeds from issuance of share capital by subsidiary companies to minority interests Proceeds from exercise of share options NET CASH USED IN FINANCING ACTIVITIES NET CASH INFLOW CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR Effect of exchange rate changes...

  • Page 82
    ... 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 83
    ...audited financial statements used are not co-terminous with those of the Group, the share of results is arrived at from the last audited financial statements available and unaudited management financial statements to the end of the accounting period. Singapore Airlines 81 Annual Report 2006-07

  • Page 84
    ... sheet date. The financial results of foreign subsidiary, associated and joint venture companies are translated monthly into SGD at the prevailing exchange rates. The resulting gains or losses on exchange are taken to foreign currency translation reserve. Singapore Airlines 82 Annual Report 2006...

  • Page 85
    ... 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 the light of experience and changing...

  • Page 86
    ... category unless they are designated as hedging derivatives. Gains or losses on financial instruments held at fair value through profit and loss are recognised in the profit and loss account. Assets in this category are classified as current assets. Singapore Airlines 84 Annual Report 2006-07

  • Page 87
    .... For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents consist of cash on hand and deposits in banks, net of outstanding bank overdrafts. The accounting policy for this category of financial assets is stated in Note 2(k). Singapore Airlines 85 Annual Report 2006-07

  • Page 88
    ... executives and all other employees. The exercise price approximates the market value of the shares at the date of grant. The Group has also implemented the Singapore Airlines Limited Restricted Share Plan and Performance Share Plan, the Singapore Airport Terminal Services Limited Restricted Share...

  • Page 89
    ... linked to the price of the shares of the Company. The cost of equity-settled transactions is recognised, together with a corresponding increase in the share-based compensation reserve, over the period in which the service conditions are fulfilled, ending on the date on which the relevant employees...

  • Page 90
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2007 2 Accounting Policies (continued) (u) Provisions (continued) If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reï¬,ects, where appropriate, the risks specific to the liability. Where ...

  • Page 91
    ... as assets when the fair value is positive, and as liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to the profit and loss account. Singapore Airlines 89 Annual Report...

  • Page 92
    ... loss account. (ad) Segmental reporting (i) 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 services. (ii...

  • Page 93
    ... to make new disclosures to enable users of the financial statements to evaluate the Group's objectives, policies and processes for managing capital. The Group will apply FRS 107 and the amendment to FRS 1 from annual period beginning 1 April 2007. Singapore Airlines 91 Annual Report 2006-07

  • Page 94
    ... for the financial years ended 31 March 2007 and 2006 and certain assets and liabilities information of the business segments as at those dates. Airline operations Airport terminal services 2006-07 2005-06 2006-07 2005-06 TOTAL REVENUE External revenue Inter-segment revenue 13,785.8 53...

  • Page 95
    ...FINANCIAL STATEMENTS 31 March 2007 Engineering services Others Total of segments Elimination* Consolidated 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005...2,202.4 2,128.8 73.6 (312.7) 1,240.7 68.8 2,202.4 1,309.5 Singapore Airlines 93 Annual Report 2006-07

  • Page 96
    ... THE FINANCIAL STATEMENTS 31 March 2007 3 Segment Information (in $ million) (continued) Business Segments (continued) Airline operations Airport terminal services 2007 2006 2007 2006 OTHER INFORMATION AT 31 MARCH Segment assets Investments in and loans to joint venture and associated companies...

  • Page 97
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2007 Engineering services Others Total of segments Elimination* Consolidated 2007 2006 2007 2006 2007 2006 2007....6) 3,026.7 32.5 1,319.4 0.6 54.0 (77.2) 2,058.8 32.4 1,227.7 12.1 54.7 (151.6) (2.9) - - - Singapore Airlines 95 Annual Report 2006-07

  • Page 98
    ... table presents revenue information on airline operations by geographical areas for the financial years ended 31 March 2007 and 2006. By area of original sale 2006-07 2005-06 East Asia Europe South West Pacific Americas West Asia and Africa System-wide Non-scheduled services and incidental...

  • Page 99
    ...) The Group 2006-07 2005-06 Surplus on liquidation of Asia Leasing Limited Recognition of liquidated damages Surplus on disposal of other fixed assets Amortisation of deferred gain on sale and finance leaseback transactions Impairment of long-term investments 1.2 32.4 43.1 1.4 (0.2) 77...

  • Page 100
    ... of the respective countries in which the 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 2006-07 2005-06 Profit before taxation Taxation at statutory...

  • Page 101
    ... cents per share) and a special tax exempt (one-tier) dividend of 50.0 cents per share (2005-06: Nil) amounting to $436.4 million (2005-06: $429.4 million) and $623.4 million (2005-06: Nil) respectively be paid for the financial year ended 31 March 2007. Singapore Airlines 99 Annual Report 2006...

  • Page 102
    ... 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. Singapore Airlines 100 Annual Report 2006...

  • Page 103
    ... average 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...

  • Page 104
    ... during the year was $1.22 (2006-05: $0.49). The weighted average share price for options exercised during the year was $3.91 (2005-06: $2.58). The weighted average remaining contractual life for these options is 7.49 years (2005-06: 7.18 years). Singapore Airlines 102 Annual Report 2006-07

  • Page 105
    ... ($) Share price at date of grant ($) SIAEC ESOP Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Exercise price ($) Share price at date of grant ($) # July 2006 Grant July 2005 Grant Management's forecast in line with dividend policy...

  • Page 106
    ... 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. Singapore Airlines 104 Annual Report 2006-07

  • Page 107
    ...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. Singapore Airlines 105 Annual Report 2006-07

  • Page 108
    ...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. Singapore Airlines 106 Annual Report 2006-07

  • Page 109
    ... a two-year performance period based on medium-term Group and Company objectives. Award of fully-paid ordinary shares of the Company, conditional on performance targets set at the start of a three-year overlapping performance period based on stretched long-term corporate objectives. Date of Grant...

  • Page 110
    ... following table lists the inputs to the model used for the July 2006 award: SIA Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected term (years) Cost of equity (%) Share price at date of grant ($) RSP PSP Management's forecast in line with dividend policy 18.28...

  • Page 111
    ... ordinary shares of the Company, for RSP and PSP respectively. SATS RSP and PSP SATS Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected term (years) Cost of equity (%) Share price at date of grant ($) RSP PSP Management's forecast in line with dividend policy 19...

  • Page 112
    ... incentive plans (continued) SIAEC RSP and PSP SIAEC Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected term (years) Cost of equity (%) Share price at date of grant ($) RSP PSP Management's forecast in line with dividend policy 16.82 - 22.31 17.49 2.99 - 3.25...

  • Page 113
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2007 14 Other Reserves (in $ million) (a) Capital reserve Capital reserve mainly relates to associated and joint venture companies of which $44.9 million pertain to revaluation of land and buildings owned by RCMS Properties Private Limited. (b) Share-based ...

  • Page 114
    ... as a result of: Deferred tax liabilities Differences in depreciation Revaluation of jet fuel swap/ option contracts to fair value Revaluation of forward currency contracts to fair value Revaluation of interest rate swap contracts to fair value Revaluation of available-for-sale financial assets to...

  • Page 115
    ... interest rates ranging from 4.20% to 4.40% (2005-06: 2.30% to 4.42%) per annum. The Group 31 March 2007 2006 Not later than one year Later than one year but not later than five years Later than five years 12.8 53.9 49.6 16.6 56.0 68.1 116.3 140.7 Singapore Airlines 113 Annual Report...

  • Page 116
    ... Repayment Payments of Principal Payments of Principal Payments of Principal Payments of Principal Not later than one year Later than one year but not later than five years Later than five years Total future lease payments Amounts representing interest Principal value of long-term commitments...

  • Page 117
    ....3 344.1 1,016.3 21.3 29.2 6.2 51.3 79.1 24.3 (895.8) (34.3) (35.2) (4.9) (4.9) (30.8) (20.2) 9.9 2.2 - - - - - 5,446.5 518.8 208.7 131.7 657.3 885.6 348.2 8,196.8 7,983.1 1,227.7 (1,026.1) 12.1 Net book value 15,161.7 15,524.7 Singapore Airlines 115 Annual Report 2006-07

  • Page 118
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2007 18 Fixed Assets (in $ million) (continued) The Group (continued) Net Book Value 31 March 07 31 March 06 Aircraft Aircraft spares Aircraft spare engines Freehold land and buildings Leasehold land and buildings Plant and equipment Office and computer...

  • Page 119
    ...xed assets acquired under finance leases: - aircraft - plant and equipment - factory building 925.4 - 76.2 838.1 93.4 2.4 933.9 1,001.6 Advance and progress payments comprise mainly purchases of aircraft, related equipment and building projects. Singapore Airlines 117 Annual Report 2006...

  • Page 120
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2007 18 Fixed Assets (in $ million) (continued) Assets pledged as security In addition to assets held under finance leases, the following assets are mortgaged under bank loans: The Group 31 March 2007 2006 Net book value of: - aircraft - building 19 ...

  • Page 121
    ...additional funds of $0.2 million into its wholly-owned subsidiary, Cargo Community (Shanghai) Co Ltd. Loans to subsidiary companies are unsecured and have repayment terms of up to 10 years. Interest on loans to subsidiary companies are computed using LIBOR, Singapore Interbank Bid Offer Rate ("SIBOR...

  • Page 122
    ... (Philippines) Corporation* Aerospace Component Engineering Services Singapore Airlines Cargo Pte Ltd Cargo Community Network Pte Ltd Cargo Community (Shanghai) Co Ltd ** SilkAir (Singapore) Private Limited Tradewinds Tours & Travel Private Limited Singapore Aviation and General Insurance Company...

  • Page 123
    ...-East Airport Services Pte Ltd was liquidated on 19 June 2006. Asia Leasing Limited was deregistered from the Bermuda companies register on 14 October 2006. SIA Cargo injected an additional $23.6 million in Great Wall Airlines Company Limited ("GWAC"). There was no change in the Group's 25% equity...

  • Page 124
    ... of business 2007 2006 2007 2006 Service Quality (SQ) Centre Pte Ltd @ Virgin Atlantic Limited * Tiger Airways Pte Ltd @ ++ Quality service training Air transportation Air transportation Aircraft leasing Singapore United Kingdom Singapore Bermuda Singapore Pakistan India Singapore Indonesia...

  • Page 125
    ... and airframe application Operation of aircraft maintenance facilities Hotel ownership and management Air cargo transportation - do Ireland 71.59 6.22 71.59 6.22 40.1 40.1 41.1 41.1 Fuel Accessory Service Technologies Pte Ltd + Jamco Aero Design & Engineering Private Limited Pan Asia Paci...

  • Page 126
    ...-current assets 135.4 57.1 204.2 1,771.9 192.5 1,976.1 Current liabilities Non-current liabilities (68.6) (37.3) (225.1) (1,388.4) (105.9) (1,613.5) 2006-07 2005-06 Results Revenue Expenses 543.8 (485.9) 57.9 299.9 (259.3) 40.6 Singapore Airlines 124 Annual Report 2006...

  • Page 127
    ... Engine Services Private Limited* Aircraft leasing Repair of aircraft components Repair and maintain Trent aero engines Singapore - do - do - - 10.07 46.53 159.14 10.07 46.53 - 41.0 41.0 35.5 42.0 42.0 * Audited by Ernst & Young, Singapore. During the financial year, the Company disposed...

  • Page 128
    NOTES TO THE FINANCIAL STATEMENTS 31 March 2007 25 Stocks (in $ million) The Company 31 March 2007 2006 2007 2006 The Group 31 March Technical stocks and stores Catering and general stocks Work-in-progress Total inventories at lower of cost and net realisable value 473.4 24.3 36.4 472.8 26.1...

  • Page 129
    ... average effective interest rate of short-term deposits is 4.3% (2005-06: 3.6%) per annum. 29 Trade Creditors (in $ million) Included in trade creditors are provision for warranty claims of $1.6 million (2006: $3.0 million) for the Group and provision for return costs for aircrafts under sales and...

  • Page 130
    ...joint venture companies Share of profits of associated companies Surplus on sale of SIA Building Surplus on sale of investment in Singapore Aircraft Leasing Enterprise Pte Ltd Operating profit before working capital changes Increase in creditors Increase in short-term investments Increase in sales...

  • Page 131
    ... is allowed under all the lease arrangements. SilkAir (Singapore) Private Limited ("SilkAir") has four A320-232 and two A319-132 aircraft under operating lease with fixed rental rates. The lease term for the two A319-132 aircraft is 5.5 years, which SilkAir holds an option to extend the lease for...

  • Page 132
    ... Company, is one of several airlines to have received notice of criminal and/ or regulatory investigations by competition authorities in the US, EU, Switzerland and New Zealand regarding whether surcharges, rates or other competitive aspects of air cargo service were lawfully determined. The Company...

  • Page 133
    ...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 134
    ... investments is the potential loss resulting from a decrease in market prices. (e) Counterparty risk Surplus funds are invested in interest-bearing bank deposits and other high quality short-term liquid investments. Counterparty risks are managed by limiting aggregated exposure on all outstanding...

  • Page 135
    ... assets and liabilities approximate their fair values due to their short-term nature: cash and bank balances, bank overdrafts, funds from subsidiary companies, amounts owing by/to subsidiary, associated and joint venture companies, loans, trade debtors and creditors. Singapore Airlines 133 Annual...

  • Page 136
    ...out the carrying amount, by 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 1-2 2-3 3-4 4-5 More than year years years years years 5 years Total 2007 Group Fixed rate Notes payable Obligations...

  • Page 137
    ..., the cash ï¬,ow hedges of the interest rate contracts were assessed to be highly effective, a net fair value gain of $12.0 million, with a related deferred tax charge of $2.3 million were included in the fair value reserve in respect of these contracts. Singapore Airlines 135 Annual Report 2006...

  • Page 138
    ...4.3 * 0.7 3.2 * 0.5 5.0 3.7 Key executives (excluding executive directors) Salary, bonuses and other costs CPF and other defined contributions Share-based compensation expense 2.0 * 0.7 2.0 * 0.7 2.7 2.7 * Amount less than $0.1 million Singapore Airlines 136 Annual Report 2006-07

  • Page 139
    ... commencement Aggregate shares Shares granted of scheme outstanding during to end of at end of financial year financial year financial year Name of participant under review under review under review RSP Chew Choon Seng LG Bey Soo Khiang Huang Cheng Eng PSP Chew Choon Seng LG Bey Soo Khiang Huang...

  • Page 140
    ... INFORMATION REQUIRED BY THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED 1 Interested Persons Transactions (in $ million) Interested persons transactions carried out during the financial year by the Group (excluding SIA Engineering Company Limited and Singapore Airport Terminal Services Limited...

  • Page 141
    ...TAXATION) PER SHARE - BASIC 2006-07 (cents) 2005-06 (cents) 46.9 19.3 23.9 28.2 47.7 32.5 53.9 21.8 172.6 101.7 EARNINGS (AFTER TAXATION) PER SHARE - DILUTED 2006-07 (cents) 2005-06 (cents) 46.7 19.1 23.8 28.1 47.2 32.5 53.2 21.6 170.8 101.3 Singapore Airlines 139 Annual Report 2006-07

  • Page 142
    ... AND LOSS ACCOUNT ($ million) Total revenue Total expenditure Operating profit Finance charges Interest income Surplus on disposal of aircraft, spares and spare engines Dividend from long-term investments, gross Other non-operating items Share of profits of joint venture companies Share of pro...

  • Page 143
    ...) Dividend cover (times) PROFITABILITY RATIOS (%) Return on equity holders' funds R4 Return on total assets R5 Return on turnover R6 PRODUCTIVITY AND EMPLOYEE DATA Value added ($ million) Value added per employee ($) R7 Revenue per employee ($) R7 Average employee strength S$ per US$ exchange rate...

  • Page 144
    ... - yield - unit cost - breakeven load factor OPERATING PASSENGER FLEET Aircraft Average age PASSENGER PRODUCTION Destination cities Distance ï¬,own Time ï¬,own Available seat-km TRAFFIC Passengers carried Revenue passenger-km Passenger load factor STAFF Average strength Seat capacity per employee R3...

  • Page 145
    TEN-YEAR STATISTICAL RECORD 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 ...16,917.2 71.2 66.0 43.7 66.2 10,765.5 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 Singapore Airlines 143 Annual Report 2006-07

  • Page 146
    ... 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. Singapore Airlines 144 Annual Report 2006-07

  • Page 147
    ... of Seats in age in operating lease Finance Operating standard years (y) and On firm Aircraft type Owned lease lease Total configuration months (m) 2007-08 2008-09 order On option Singapore Airlines: B747-400 B777-200 B777-200A B777-200ER B777-300 B777-300ER A340-500 B787-900 R1 A330-300 R1 A380...

  • Page 148
    ... Insurance Company (Pte) Limited SIA Properties (Pte) Ltd Singapore Flying College Pte Ltd Sing-Bi Funds Private Limited Singapore Airlines Cargo Private Limited SIA (Mauritius) Ltd Singapore Airport Duty-Free Emporium (Private) Limited Service Quality (SQ) Centre Pte Ltd Virgin Atlantic Limited...

  • Page 149
    ... Air Cargo Services Corporation Singapore Airport Duty-Free Emporium Evergreen Airline Services Corporation MacroAsia-Eurest Catering Services Inc. 100% 100% 65% SIAEC Global Pte Ltd Singapore Jamco Private Limited Aerospace Component Engineering Services Pte Ltd Aviation Partnership (Phillipines...

  • Page 150
    ... Ordinary Shares One special share held by the Minister for Finance (Incorporated) 1 vote per share Range of shareholdings Number of shareholders % Number of shares 1 - 999 1,000 - 10,000 10,001 - 1,000,000 1,000,001 and above Total Location of accounts Number of shares % Number of accounts...

  • Page 151
    ... 2007 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 21 Temasek Holdings (Private) Limited DBS Nominees Pte Ltd HSBC (Singapore) Nominees Pte Ltd DBSN Services Pte Ltd Citibank Nominees Singapore Pte Ltd Rafï¬,es Nominees Pte Ltd United Overseas Bank...

  • Page 152
    ... AND TURNOVER For the financial year ended 31 March 2007 2006-07 2005-06 Share Price ($) Highest closing price Lowest closing price 31 March closing price Market Value Ratios R1 Price/Earnings Price/Book value Price/Cash earnings R2 18.00 12.00 16.60 14.90 11.10 14.00 9.62 1.37 5.85 13.77...

  • Page 153
    ... Ordinary Business 1. To receive and adopt the Directors' Report and Audited Financial Statements for the year ended 31 March 2007 and the Auditors' Report thereon. 2. To declare a final tax exempt (one-tier) dividend of 35 cents per ordinary share for the year ended 31 March 2007 and a special tax...

  • Page 154
    ... 13 per cent of the total number of issued ordinary shares in the capital of the Company from time to time. 9. To transact any other business. Closure of Books NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the final dividend and special dividend being obtained at the...

  • Page 155
    ...proxy or proxies must be deposited at the office of the Company's Share Registrar, M & C Services Private Limited, 138 Robinson Road, #17-00 The Corporate Office, Singapore 068906 not less than 48 hours before the time fixed for holding the Meeting. Singapore Airlines 153 Annual Report 2006-07

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  • Page 158
    This page has been intentionally left blank. Singapore Airlines 156 Annual Report 2006-07

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