IMPACT OF GLOBAL SITUATION ON SINGAPORE AIRLINES

Like other international commercial airlines, Singapore Airlines (SIA), expects to enter a difficult trading period as a result of last week’s events in the United States, which follow a slowdown in the economy in the past 12 months.

Following last week’s terrorist attacks, SIA’s traffic has declined on services to the United States. Forward bookings on the transatlantic services to New York and Chicago in the coming weeks have declined about 10 per cent compared with pre-attack levels. However, bookings on US services across the Pacific to Los Angeles, San Francisco and Vancouver, are generally holding, as of now. We are continuing to closely monitor the forward bookings and uplift levels.

The slowdown in the economy has already affected traffic flows and freight traffic systemwide. The terrorist attacks have had an additional impact, with people now appearing to be less inclined to travel for business or pleasure. Costs continue to rise, particularly those of fuel and insurance.

From 1 October, SIA, like other airlines, will face increased insurance cost. As a result of the attacks in the United States, a war surcharge will be levied in respect of passenger liability cover, equivalent to USD1.25 per passenger, on all flights. This surcharge will be passed on to the customer.

In light of the prevailing situation, SIA has reviewed its operating patterns. In the near future, some frequency adjustments will be made to the following services:

· Singapore - Amsterdam - New York (Newark) – currently four per week;

· Singapore – Hong Kong – currently seven per day;

· Singapore – Kaohsiung – currently five per week;

· Singapore – Kuala Lumpur – currently ten per day;

· Singapore – Surabaya – currently 12 per week.

In the coming weeks and months, if the situation deteriorates, capacity systemwide will be reviewed to match demand. Budgeted growth will also be trimmed, even if that means lower aircraft utilization.

Non-essential expenditure will be deferred, slowed down or cancelled. Retrenchment cannot be ruled out, but other cost-reducing measures will be pursued first, before retrenchments are considered. Staff recruitment, other than in one or two essential areas, will be frozen until the situation improves.

The reality is that if military action takes place with subsequent terrorist reprisals, passenger traffic and cargo loads can be expected to decline further. There is also the possibility of the closure of vital air spaces in such circumstances. If these events materialise, further cuts in services would be needed and costs will rise. SIA has made contingency plans to use alternate flight paths if the normal flight paths are closed to air traffic, to ensure passenger safety is not compromised.