Singapore Airlines 2012 Annual Report Download - page 123

121ANNUAL REPORT 2011/2012
Notes to the Financial Statements
31 March 2012
3 Significant Accounting Estimates (continued)
(d) Frequent Flyer programme
The Company operates a frequent flyer programme called “KrisFlyer” that provides travel awards to programme
members based on accumulated mileage. A portion of passenger revenue attributable to the award of frequent flyer
benefits is deferred until they are utilised. The deferment of the revenue is estimated based on historical trends of
breakage and redemption, which is then used to project the expected utilisation of these benefits. Any remaining
unutilised benefits are recognised as revenue upon expiry. The carrying amount of the Group’s and the Company’s
deferred revenue at 31 March 2012 was $497.0 million (2011: $445.1 million).
฀ (e)฀ Aircraft฀maintenance฀and฀overhaul฀expenditure฀under฀power-by-hour฀agreements฀
The Group has entered into several power-by-hour (“PBH”) engine maintenance agreements with engine original
equipment manufacturers. The monthly payments are based on the number of flying hours flown. A portion of the
cost is expensed at a fixed rate per hour during the term of the PBH agreement. The remaining payments made are
recorded as an advance payment, to the extent that it is to be utilised through future maintenance activities, if any,
or capitalised upon completion of an overhaul.
The proportion of the amount to be expensed off and capitalised is determined based on the best estimate as if the
engine maintenance and overhaul costs are accounted for under the time and material basis. The carrying amount
of the advance payment relating to PBH agreements for the Group and the Company at 31 March 2012 was $684.3
million (2011: $538.1 million) and $634.3 million (2011: $497.5 million) respectively. The maintenance and repair
costs covered by PBH agreements which are expensed off during the year amounted to $38.0 million (2011: $40.2
milion) for the Group and $35.8 million (2011: $38.1 milion) for the Company.
4 Segment Information (in $ million)
For management purposes, the Group is organised into business units based on the nature of the services provided,
and has 4 reportable operating segments as follows:
(i) The airline operations segment provides passenger air transportation.
(ii) The engineering services segment is in the business of providing airframe maintenance and overhaul services, line
maintenance, technical ground handling services and fleet management programme. It also manufactures aircraft
cabin equipment, refurbishes aircraft galleys, provides technical and non-technical handling services and repair and
overhaul of hydro-mechanical aircraft equipment.
(iii) The cargo operations segment is involved in air cargo transportation and related activities.
(iv) Other services provided by the Group, such as training of pilots, air charters and tour wholesaling, has been aggregated
under the segment “Others”.
Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.
Management monitors the operating results of its business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss
which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the
consolidated financial statements.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with
third parties.