Singapore Airlines 2016 Annual Report Download - page 138

Notes to the Financial Statements
31 March 2016
3 Significant Accounting Estimates and Critical Judgements (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 upon redemption, which is then used to project the
expected utilisation of these benefits.
In addition, the Company also sells miles to programme partners for issuance to their programme members. For miles purchased by
programme partners, revenue is deferred until awards are utilised. The deferrals are based on the expected utilisation of these awards.
The carrying amount of the Group’s and the Company’s deferred revenue at 31 March 2016 was $669.4 million (2015: $612.5 million).
(e) Aircra 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 o and capitalised is determined based on the best estimate of the proportion of day to
day maintenance compared to maintenance which extends the useful lives of the engine. The carrying amount of the advance payment
relating to PBH agreements for the Group and the Company at 31 March 2016 was $475.3 million (2015: $375.8 million) and $350.6 million
(2015: $272.9 million) respectively. The maintenance and repair costs covered by PBH agreements which are expensed o during the
year amounted to $61.4 million (FY2014/15: $47.7 million) for the Group and $35.2 million (FY2014/15: $33.9 million) 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 three reportable
operating segments and one other operating segment 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. It also manufactures aircra cabin equipment, refurbishes aircra galleys, provides
technical and non-technical handling services and repair and overhaul of hydro-mechanical aircra equipment.
(iii) The cargo operations segment is involved in air cargo transportation and related activities.
(iv) Other services provided by the Group, such as the training of pilots, air charters and tour wholesaling, have been aggregated under the
segment “Others”.
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 dierently from operating profit or loss in the consolidated financial statements.
Transactions carried out between operating segments during the financial year are in the normal course of business.
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