TRANSCRIPT FINANCIAL RESULTS BRIEFING Half-Year Ended 30 September 2007 (Read in conjunction with Powerpoint Presentation) Singapore Expo Wednesday 31 October 2007, 5.05pm E&OE Edited for grammar

Speakers: Mr Chan Hon Chew, Senior Vice President Finance In order Mr Chew Choon Seng, Chief Executive Officer Mr Stephen Forshaw, Vice President Public Affairs Mr Huang Cheng Eng, Executive Vice President Marketing and Regions, and Chairman, SIA Cargo Pte Ltd

(Recording begins)

Mr Chan: Good evening ladies and gentlemen, thank you for joining us this evening for the presentation of our half year results. I will kick off with the Parent Airline Company.

First the highlights. For the half year 2007-08, the Parent Airline’s capacity was down 1.0%. And on this lower capacity we grew passenger carriage by 2.6% and that’s a result of improvement in the passenger load factor by 2.8 points to 80.3%. On the yield side, we saw growth as well by 9.3% and with the higher load factor, higher yield, revenue was up 10.6% to $6.0B. Unit cost gone up but at a slower pace than revenue growth and all this translates to an operating profit of $781M.

Let’s take a closer look at the numbers.

Total revenue, $6 billion, 10.6 percent higher, this is on the back of 9.4 million passengers carried. Expenditure has gone up as well, about $168 million higher than last year, but in percentage terms, 3.3 percent, at a lower rate than our revenue growth. So as a result, operating profit, $781 million.

Let’s take a closer look at the operating statistics. First, the yield was higher by 9.3 percent and that’s really a reflection of the strong travel demand in the airline industry. While in terms of our unit cost, it’s gone up by 5.1 percent and because

1 the yield growth was higher than our unit cost increase, our breakeven load factor has improved by 2.8 points to 70.1 percent.

Let’s look at capacity. It was down 1 percent and on that lower capacity we managed to grow passenger carriage by 2.6 percent and that’s from improvement in our load factor, by 2.8 points to 80.3 percent. So with the 2.8 points improvement in our passenger load factor and the 2.8 points improvement in our breakeven load factor, we see the spread between the passenger load factor and the breakeven widening by 5.6 points to 10.2 points.

Let’s look at trends for the past four years. A healthy picture, a steady growth in our load factor. Comparing that to our breakeven load factor, however, you will notice for the past three years the breakeven load factor has been going up and that’s a result of higher fuel cost.

This year the breakeven load factor has actually gone down for the first half and that’s really a reflection of the strong travel demand in the industry, which benefited our yields. So yield growth was actually higher than increase in our unit cost and at the same time that benefited our load factor, and that has widened our spread between the passenger load factor and breakeven load factor to 10.2 points, comparing against last three years at around 5 points.

Moving on to costs, the top five expenditure [items] makes up about 80 percent of our total expenditure. Again, top of the chart here we have fuel, continues to be our biggest expenditure; 36.4 percent; followed by staff cost, about 16.5 percent; aircraft depreciation and rentals, 10 percent; and the other two, less than 10 percent.

Let’s take a closer look at fuel expenditure, in US dollars, a year-on-year comparison. The starting point here, the fuel spent for the first half of the previous financial year, we spent US$1.29 billion on fuel. As you saw earlier our capacity went down and as a result there was lower fuel volume uplifted, that reduced our fuel cost by about US$7 million. Year-on-year, in average, weighted average fuel price was lower by about 2 percent and that contributed $27 million reduction in the fuel cost. And for the first half of the year, the total fuel, bill still very high, at US$1.259 billion.

Now this is a year-on-year comparison, so it does not reflect the prevailing trend of fuel prices. To put things in perspective, let’s look at the quarter-on-quarter trend of fuel prices. What we saw in the previous chart was year-on-year comparison, meaning the first half of this year compared to the first half of last year. You notice, yes, fuel price was lower but you can see the trend for the first half of this financial year, fuel prices were in an upward trend and as we all know, over the past week we saw fuel prices recording new highs, and for jet fuel prices, breaching the hundred US dollar mark; actually it’s beyond the scale of this graph. So that will be the challenge for the second half of the year.

2 And as we all know we have two mitigating measures; one is of course fuel hedging, our CEO, Mr. Chew, will update on our fuel hedging programme; and of course the other is the fuel surcharge. And this graph shows the fuel surcharge per passenger in US dollars, and from here you can see the trend follows quite closely with the trend of fuel prices and in fact for third and fourth quarter of last financial year, and the first quarter of this financial year, it was in the downward trend. And in fact the first quarter, the current financial year, it went down despite fuel prices going up. That’s because of the time lag.

One more slide, before I go: Subsidiaries.

First of all, SIA Engineering did better compared to last year; 4.8 percent improvement on account of better contributions from associated companies and joint ventures.

SATS, however, bottom line lower by about 4 percent. That’s because of lower revenues and higher expenditure. I will not go into details as these are two listed companies. There will have their separate analysts’ briefings.

SIA Cargo, they did well, to turn around from a loss of $36 million last year to a profit of $17 million this year. And that is really on account of effective cost management by SIA Cargo management. Although yields continued to be under pressure, it fell about 4.9 percent, cost control effectively brought unit cost down by 7.6 percent at a higher rate than the reduction in cargo yields.

Last but not least, SilkAir, the bottom line, $9.4 million, almost $7 million higher than last year as a result of higher loads and yield growth.

With that I conclude this segment of the presentation. I hand over to Mr. Chew.

Mr. Chew: Thank you, Hon Chew. Just one additional comment about the cargo turnaround. Hon Chew mentioned good cost management. Yes, but, equally important, it was close capacity management that enabled SIA Cargo to turn around by better than $53 million in six months, year-on-year.

Let me now give you the consolidated group numbers. That takes into account the parent company, the main subsidiaries as you saw, plus all the associates. And this is the picture.

Group revenue for the six months added up to $7.6 billion, which is an improvement over the first half of ’06 by 8 percent and in line with the four year compound average growth of 7 percent. So there’s been quite a steady trend, uptrend in group revenue.

On the expenditure side, as led by the parent company, the rise in expenditure has been mitigated to under 2 percent, year-on-year, and this compares with a four year

3 average growth in expenditure of 6.4 percent, which is not unnatural in the order of things that as you go to a much higher base, then the rate of growth should slow down, as indeed is shown here.

Next, group operating profit for the first half. Yes, the number is correct. Operating profit, $982 million, which is an 84 percent improvement from the $533m, for the first half of the last financial year.

Contribution to group operating profit by unit; SIA, the parent passenger airline company, contributed nearly 80 percent of the total group operating surplus. SATS pulled in 9.5 percent which is 8 points lower than the preceding year’s first half. Engineering Company contributed 6½ percent, in terms of contribution, a drop from 6.2. And SIA Cargo, because of its turnaround, improved its contribution by 7.2 points, and what got traded off in return for the lower contributions from the two listed subsidiaries is reflected in the fact that the parent company’s contribution went up 10 points.

So those are the headline numbers; SIA’s operating profit up $413m; SATS, down $3.7m; Engineering company down $4.5m. I hasten to add, to stress, that this is operating profit before contributions to the subsidiaries from their associates and joint ventures. Cargo, up $47.3m; all year-on-year operating profit comparisons.

And another analysis of how the improvement in group operating profit came about: last year, for the first half, it was $533 million. Because of improvement in operating revenue throughout the group through higher throughputs, loads, and improvement in yields at the parent airline, and increased business volumes at the subsidiaries added $560 million, bringing total up to $1093m. On the other hand, as Hon Chew also pointed out, our total expenditure at a group level was higher by $111 million. So that $1093m less $111m gives us $982m, which is what we have pulled in at the operating level; an improvement of $449 million.

Now the net profit. This perhaps is a more interesting picture because it is net of tax, and does take into account all the contributions from associates and joint ventures.

Again, the preceding year’s first half, we had a number of $868m. But that $868m included $223 million gain on the sale of SIA building in that period. So if you adjust for the exceptional item, last year’s first half net profit would have been $645m. As you have seen, we improved the operating profit by $449m, from the previous slide, that would have brought us $645m plus $449m, brings us up to $1094 million.

However, in the period under review, the surplus that we recognized on the disposal of aircraft and other capital assets was $75 million lower than the year before. So we adjust for that $75 million less and the change in net profit then comes to $1019m, and if we provide for tax and minority interests, another lowering by $87 million, and that brings us to $932m, which is an improvement of the previous year’s $868m, even without disposal of the building. We have no more buildings left to

4 take big surpluses on, but still the result is an improvement of $64 million. And if we count for the fact that the $223m was an exceptional item, in fact, on an adjusted basis, the improvement is $287m on a base of $645m.

On a per share basis, the parameters stack up as follows: Cash flow EBITDAR per share, Singapore dollars, for half year was $1.75, an improvement over the $1.61 of the previous year. In terms of earnings per share for the half year, it was 74.7¢; very coincidental, an improvement again of about 5 percent on 70.8¢ of the year before. And as a result of all that, the Board has decided to declare an interim dividend of 20 cents per share, up from 15 cents a share in the first half of last year, for the first half of last year, as an interim dividend.

In terms of net asset value [NAV] backing per SIA share, as at end of September this year, it stands at $11.65 compared with $12.11 at the end of March and the reduction is because of the special dividend that we paid out in September as well as the capital return exercise that we completed on 10th October. So the NAV, even after the return of capital is healthily catching up again.

Looking ahead, some of the major issues that occupy us in management. First of all, fleet development, right at this moment we are flying 92 aircraft. For the remainder of this financial year, through until end of March, we will be adding three Airbus 380s, the first of which was put into service just this past weekend. And then we have four more 777-300ERs joining the fleet in this period and by the end of this financial year we will have a total of 99 planes; 92 plus the seven deliveries, bringing us up to 99.

In terms of capital expenditure for the next five years, this is how it stacks up. The principal expenditure as all as you can see, for aircraft and related equipment, ranging from, and total capex including our other investment in plant and infrastructure, would range from a low of S$2.7 billion, over the next couple of years, and to a high of $4.6 billion in financial year 11/12 as we progressively make payments for the new fleet additions of more A380s as well as -300ERs in the coming couple of years, and then gearing up for delivery of the 787s-9s that we have ordered, which are deliverable starting in calendar 2011, and followed at the tail end of this five year period in 2013 by the first of the Airbus 350XWBs.

Those of you who track our presentations on capex may notice that the bottom line numbers actually have diminished a little bit in some of the intervening years and the reason for that is that we have updated our plans for development of the freighter fleet. In earlier presentations we did allow for the rate of increase of one freighter to SIA Cargo’s fleet a year. In this update, that has been trimmed back. We will no longer be adding, we are not making a provision at this juncture for any addition of pure freighters in new configuration to the SIA Cargo fleet. Instead, SIA Cargo will be adding a couple of converted freighters, converted, that is, from our old 747-400s passenger aircraft that are being phased out of passenger service and will be converted to freighter work.

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Fuel hedging position for the balance of the financial year. First of all, our budgeted uplift volume for the full year is 37 million barrels. We have hewed to a target of hedging at least 45 percent, plus/minus 15 percent of that volume, so giving us a range of between 30 to 60 percent. As at October, in terms of the volume of our annual requirements which we have hedged stands at 47%, which is about smack in the middle of our target range. The average hedge price is US$88 per barrel. And how we fare on hedging will remain to be seen, as fuel prices continue to be volatile, as Hon Chew has observed a while ago.

China Eastern Airlines, this has been in the news and lately has thankfully quietened down a little bit. But to recap, the rationale for our pursuing the opportunity in China Eastern Airlines is thus, firstly, this is a long term strategic investment. We’re not looking to make a trading profit. So comments that at the transaction price of HK$3.80, and today’s or yesterday’s closing price of HK$8.35 per H share in CEA, we would have more than doubled our proposed investment, are rather off the mark. We are not looking to trade. There’s in fact a lock-up period of three years if the investment should proceed, with all necessary approvals in hand.

Secondly, the other rationale for it are more really strategic, in terms of very good network feed between China Eastern and SIA, in that there’s very little overlap in that all their services serve the direct needs out of Shanghai and the other sub-hubs in Xian, Kunming and Wuhan, and SIA’s network, which is more focused on long haul spokes out of the Singapore hub.

Of course it enables SIA to participate directly in China’s growth and that story is well told enough for us not to need to repeat it here, suffice for me to say that we fully understand and do not confuse growth with profit.

Strategic partnership, how we propose to consummate it without giving too much away because our competitors would really love to know – I can only say that we will be able to participate actively at the Board level as well as in the management of China Eastern. We have two seats on the Board, according to the arrangements, and we will be seconding initially to begin with, at any rate, about a dozen senior SIA management staff to hold key positions in China Eastern. We have drawn up the framework for a comprehensive commercial partnership and cooperation arrangement that would incorporate twinning of the Singapore and Shanghai hubs, code share arrangements on all services between Singapore and Shanghai, and joint marketing activities, plus we will explore joint operations beyond our respective hubs.

Now some comments on our outlook for the second half. First of all, there’s no need for me to mention in greater detail than the head line here: The uncertainty in the global economy. You all have seen in the financial columns and the media, even in the popular media, about the volatility that the credit crunch is reeking on

6 financial markets all over the world, precipitated by the sub prime loan situation, collateralized debt obligations and the rest of it.

That in turn, those sort of uncertainty does cast some clouds over what has been a very buoyant revenue environment and that’s before even taking into account very high fuel prices. Hon Chew mentioned fuel prices nudging or even passing the US$100 per barrel mark of recent days. I think as of yesterday, for crude oil deliverable, next month, prices have gone up to about $93 per barrel. So we’re not out of the woods yet so far as fuel prices are concerned.

And the last thing that is sure as death and taxes: competition, this thing will never cease. We know the most fatal thing for us is in the warm glow of the reception for the Airbus 380, to ever let such things get to our head. The competition is ever alive and well and very close behind us, not beyond copying and matching us, step for step. All the more important for my colleagues and I in SIA to keep up the pace and make sure SIA stays ahead. With that I thank you for your attention. I will invite my colleagues to join me up here on the podium for the question and answer.

Stephen Forshaw: Ladies and Gentlemen, just a reminder if I may to wait until the microphone reaches you and then identify yourself by name and organization, and we do have to leave here just before six o’clock so that Mr. Chew can brief our staff on the results. Are there any questions? Sorry, I should actually introduce the panel before I handed over the questions. If you will excuse me a moment. On my far right, Mr. Chan Hon Chew of course. Next to Mr. Chan, Mr. Huang Cheng Eng, the Executive Vice-President, Marketing and Regions, Mr. Chew, and on my immediate right, Lieutenant General Bey Soo Khiang, Senior Executive Vice-President for Operations and Services.

Q: Good evening, everybody. I’m Corrine from Citigroup. I have two questions for you. The first one is: can you give us any comment on how SIA can benefit from the Singapore – UK new open skies agreement in the medium to longer term? And my second question is: If the Singapore – Malaysian routes do open up to more carriers, how would, what would be the implications for SIA and could you please also give us an update on Tiger Airways. Thank you.

Mr. Chew: Corrine, I will take your two questions, three questions is it, as best I can. First of all, the Singapore – UK open skies agreement will only take effect after proper due ratification and so on, so to be technically correct, available only after next year, 2008, sometime in 2008.

It sets an excellent template for what we have been advocating all these years, that restrictions on access to markets, routes, should be liberalized in today’s world. It is revolutionary that it has bestowed on Singapore carriers the right to establish a base in the UK from which to operate anywhere that we choose and it is indeed an enlightened approach because you must remember that even if ownership of such

7 an airline is Singaporean, the jobs and activity, economic activity created are all going to benefit the UK. As indeed in Australia, the fact that you know Tiger Airways, a fully foreign entity can set up an airline in Australia to operate domestically, the ownership doesn’t matter.

The reality, however, is that for SIA to benefit from such rights we would need concurrent approval from third countries, not just the UK alone, to operate between the UK and those countries; those rights are not available yet. Well, in the fullness of time it will come. I can’t give you a date when various government regimes will see the light of day but, you know, it will come some time in the future. For now the immediate access rights that we will be able to enjoy under that bilateral opening up would be beyond rights, without limitation. The reality again, however, is that the centre of gravity of air travel between the UK and North America is through Heathrow; not just through , but through Heathrow. We know that for a fact because from our own association with , Virgin Atlantic migrated the bulk of its services from Gatwick to Heathrow because the quality of the traffic, meaning higher yield traffic all moves out of Heathrow than from Gatwick which is more a leisure and a group market. Heathrow, again another reality of life, is congested, it’s filled up to the gills especially during popular travel hours. So unless we want to fly from Heathrow to New York, say departing at 6 a.m. in the morning and arrive back right on, before curfew starts at 23.59, there’s no room for a new player.

The only way you can get in is to buy slots. The going rate for a pair of prime time slots, and you may need more than one pair just to, and we would need prime time because a fifth freedom operator like SIA would, of needs, be only one frequency a day compared with the multiple frequencies of the home based carriers, British Airways, Virgin Atlantic, United, American, for us to be competitive, we need good times, a good pair of slots, single pair; one landing, one take-off in each direction, that means four slots, is north of 30 million pounds. That’s not economic.

So on paper the opportunities are there but I think a paper advantage is a good starting point. So it’s very long winded reply to your question but if you are thinking of your analysis projecting that, you know, will be going gang busters on the route, benefiting from this, no.

I think in a sense it’s a very pragmatic approach by the UK government. All kudos to them but I think they also did their sums and know that, well, this is a pyrrhic victory for you here. Great deal, but no money in the kitty yet. Some point in time, maybe. Maybe the additional runway with the new terminals development in London, Heathrow, or maybe even Stansted can develop some other things that could be equally useful. It is nevertheless advantageous for us to have the potential of tapping into the open bilateral.

8 On opening up of the air routes between Singapore and Malaysia, that one is of interest to us because at the moment, or at least to our subsidiary, SilkAir, and our associate, Tiger, in particular.

We are consistent, in that when we advocate liberalization, we do it without exception, i.e., so we will not say, you know, argue for open skies but when it comes to Singapore – Malaysia, no, protect us, we like this duopoly.

You may well ask, well, what is the damage to you. The answer is: I don’t know. At the moment, yes, the route does yield useful, but not material profit to us, because in the scheme of things, in the light of those numbers that we showed you or you looked at our last full financial year’s results, the profits that we get – I would refrain from disclosing what the exact number is but I can tell you it’s not material; not material meaning it’s much less than 5 percent of our total profits.

So the point of fact is that even if the bilateral opens up to the low cost carriers and to other carriers, we are not going to lose that market overnight completely. So the dent would literally be very small. I would only point you, if you want a corollary, to our experience on the Bangkok route where for coming to three years now we’ve been operating alongside, you know, Air Asia, Thai/Air Asia, Tiger, Valuair, Jet Star, and SIA did not have to trim back a single frequency.

Likewise when the low cost carriers started to Phuket, SilkAir did not cut flights between Singapore and Phuket. They in fact added. Today they are three times a day. So the market has grown. The LCCs create their own markets. True, I will grant you that our yields took a beating on the Singapore – Bangkok run, for SilkAir on Singapore – Phuket. I think for SIA our fares came down between 20 and 25 percent in coach but our yields in business and first on the routes helped. Traffic volume held up. So overall the routes remained profitable, not as much as before but still profitable. So that will, it’s a good analogy as to what our outlook is like for the Singapore – KL route.

Your last question on Tiger Airways. Well, Tiger is a private company, as you know, so we have other partners in there. Suffice for me, in the past I used to say Tiger has been cash flow positive. I can now tell you for sure that in the last quarter, in the second quarter, the July – September quarter, Tiger more than covered … more than generated cash flow. It had a bottom line plus. --- I can even say that we made $1 million for three months. Not big deal? But it is a big deal.

Q: [Paul Dewberry from Merrill Lynch] Three questions for you. Firstly, yield performance is very, very impressive. Can it be that people are prepared to pay more for your new products? Can you break out yield development in the first part of it, a bit more to mix price and currency impacts? Secondly, interesting point you took up, uncertainty of the global outlook, is that a, just a general warning or you’re seeing anything in forward bookings that’s starting to worry you? And thirdly, on cargo can you give us a bit more colour into exactly … you spoke of capacity

9 redeployment. Which routes are doing particularly badly and those on which you found more joy? Thanks

Mr. Chew: Well, I will take the middle question and then for your other more difficult questions, I would turn them over to Stephen Forshaw. (Laughter) He’ll give you a PR type of answer but I’ll ask Cheng Eng and Hon Chew to fill those and to give them a bit more time to gather their thoughts, I will address your middle one.

No, it’s just a general foreboding as I did qualify; the last thing we need is to be complacent. We never want to be complacent because there are clouds but it is more, something to keep at the back of the mind. It is not reflected in our forward bookings. Our forward bookings remain robust and lest I come across as being too cheerful, I would just point you to the fact that it is not just SIA; the industry as a whole has been doing great on volumes. The statistics that IATA, the International Air Transport Association, will show that for the entire global airline industry, average load factor has been 80 over percent, between 80 to 82 percent. So the revenue environment has been very strong.

But however, you know, I’ve been long enough in this business to know that these things don’t last forever, something may come at you from left field and it’s always good to have a plan B and plan C in our back pockets. That, it was more in that light, not meant as a warning but, so the answer to your question, are our forward bookings looking good, yes, they are.

Mr Chan: Your question on the yield, the breakdown, the 9.3 percent improvement in yields, a large part of that actually came from higher local currency yield, i.e., the underlying fares. So 6.6 percent of that actually came from local currency yield, and as for change in passenger mix, meaning improvement in the mix, more first class, business class, that also contributed to the yield growth to the extent of about 1.6 percentage points. The rest, the remaining 1.1 is between foreign exchange and fuel surcharge.

Mr Huang: On the cargo front, what we have done is that we tightened up the capacity management and on our network so that we focus our Freighter services on areas where we see better growth prospect, for example, places like India, China, even imports with USA are still holding up. So the focus is on those areas. We’re also looking, Cargo is also looking into areas where there’s charters possibility, so we can go towards like events like F1 and concerts and things like that. So that would give us some additional opportunity. At the same time, we look at new markets. I think Cargo has announced operating a freighter into Vietnam. So that will give us a good feed in Singapore and on to places beyond. So overall those are the market that is still holding up and I think with that we can continue to perform well in cargo.

Q. [Matthew Chan, Goldman Sachs] Further follow-up question on cargo, if I could just get some outlook in terms of, given the uncertainty in the global economy, have you seen any weakening in volumes or perhaps in the yields ? Thank you.

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Mr Huang : The volume is there, I think the economy is holding up globally quite okay and that’s for cargo. There could be some fiercer competition from the seafreight side but the volume on the whole as reported by IATA is up 5% or 6% or so. So in that respect, I think going forward it is tough, challenging. Yield will take a little bit of beating but I think the load will hold up.

(Ends)

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