1H FY2019/20 Financial Results Analyst & Media Briefing

Welcome to the media and analyst briefing for Singapore Airlines ’ second quarter and first half results. My name is Siva Govindasamy and I’ll be your moderator today. The morning’s programme will be as follows. We will begin with Mr. Stephen Barnes, SV P Finance, who will present the Group’s results. This will be followed by a presentation by Mr. Goh Choon Phong, Chief Executive Officer, with an update on our strategic initiatives. We will then move to the Q&A segment, which will be led by Mr. Goh. Joini ng him on the panel will be Mr. Barnes, our EVP Commercial, Mr. Mak Swee Wah, as well as our EVP HR and Operations, Mr. Ng Chin Hwee. So, I would now like to invite Mr. Barnes to give his presentation. Thank you.

Good morning. Thank you, Siva. CEO, EVPs, guests who are here this morning. If I may linger, first of all, on some highlights for the half year. And starting off with passenger growth. Passenger growth has been strong. All of the three passenger airlines were able to catch th at strong demand. SIA’s traffic, in particular, grew more rapidly than capacity growth. So, we achieved a record load factor for the summer months with improvement in RASK.SilkAir was contending with the transfer of routes to Scoot as well as the groundi ng of the MAX 8 aircraft. So this has clearly put a great deal of pressure on its production and its ability to drive improved revenue. And yet it did. Revenue grew on the back of stronger traffic growth and higher loads. For Scoot, capacity expansion w as relatively moderate of around 5.6% for the half. Traffic grew a little bit more rapidly, as it was able to fully capture the transfer of routes across from SilkAir. However, it did have to contend with aircraft that were grounded and we consciously mana ged utilisation of the fleet to ensure operational resilience. Net fuel costs rose not because of fuel price. Fuel price has fallen but fuel costs rose in line with the increase in volume consumed. We had higher ex -fuel cost primarily but not completely attributable to the growth in the scale of the operations.

And then below the operating line, we had a significant improvement in the contribution of associates and joint ventures, which matched or mitigated the increase in finance charges which we’ll come to. The other perspective for the second quarter is the growth in revenue, which was driven by the increase in passenger flown revenue. Passenger flown revenue was offset to a degree by reduction in cargo revenue. Obviously, it has been a difficult environment in cargo. Non -fuel costs were up $ 160 million or around 6%, mainly attributable to the expansion of the operations as mentioned. And then, net fuel costs were up to 1.7%. The same picture applies for the whole of the first half. Again, we had strong passenger revenue growth. Some were offset by the reduc tion in cargo revenue; costs rising either in line with the consumption of fuel or the increase in the scale of the operations. Bottom -line, the operating profit was somewhat stable but down about $13 million for the half. Operating margin ticked down fro m 5.4% to 5.0%. Some of the operating statistics which was already been published so I won’t linger particularly long. But I wanted to call out the strong 8.6% growth in passenger traffic in SIA, leading to 1.0% pt increase in load factor, a record. Yo u see in SilkAir, the growth in passenger traffic, despite the fact that the capacity was actually down a little bit so a strong uptick in passenger load. And then for Scoot, which is already operating at a fairly high passenger load factor, managing to ma intain and even slightly improve that. Cargo essentially is suffering from a macro -economic environment - loads are soft, yields are soft, and as a consequence, you’ll see that revenue is down. The pie chart to the right just to give you a sense of the relative production of capacity and traffic in the low -cost business compared with the full -service business. From a standing start, in six or seven years ago, the Group now has 20% of its capacity and its traffic generated by Scoot. A very quick slide just to sort of give you a picture of the overall growth and revenue up to 5.3% or $418 million. Look at where that came from. You can see that for the Group, the passenger revenue was up 8.2%. Cargo revenue down $138 million. I would like to call out th e highlights -the growth in engineering services revenue. This is primarily driven by Engineering Company’s growth in line maintenance with third party airlines, not with SIA particularly. Other passenger revenue is down. That’s coming from a number of so urces but primarily charter services were reduced during the half.