Singapore Airlines is named as winner of the prestigious Airline of the Year title, top honour of the 2007 World Airline Awards.

"This has been our longest running passenger survey and our largest ever" said Edward Plaisted (CEO of survey organisation, Skytrax).

"Over 14 million eligible nominations were received from around the world ... we were heartened by the international appeal of the survey. From Beijing to Buenos Aires, Sydney to Stockholm, the sheer breadth of the project adds yet further support to the title of the World's Largest Passenger Survey."

http://www.worldairlineawards.com/main/aoy-2007-release.htm

CIMB-GK

Raising fuel surcharges for the third time

Higher fuel surcharges from 2 August

SIA yesterday announced higher fuel surcharges for the third time this year in order to mitigate rising jet fuel prices (Figure 1). The new rates will apply to tickets issued from 2 Aug 07. SIA first announced an increase in fuel surcharges on 22 Mar, for tickets issued on or after 1 Apr, and then again on 3 May, for tickets issued on or after 9 May. The new rates are as follows:

? Flights between Singapore and Asean destinations (Kuala Lumpur, Penang, Brunei, Bangkok, Bali, Hanoi, Ho Chi Minh City, Jakarta, and Manila) will be charged US$22 per sector (+10% from US$20 currently).

? Flights to the US and Canada will be charged US$98 (+10.1% from US$89 currently).

? Flights to all other destinations will incur a fuel surcharge of US$63 (+8.6% from US$58).

These new rates are SIA?s highest ever, and demonstrate SIA?s pricing power in an environment of strong travel demand and tightly utilised seat capacity (Figure 2). Fuel surcharges reached their last peaks of US$20 for Asean, US$90 for US/Canada and US$60 for other destinations in Aug 06 ? exactly a year ago ? but the new rates exceed them by between 5-10%. In contrast, current jet fuel prices are roughly equivalent to last year?s prices (Figure 3). This is consistent with our expectation that SIA will take advantage of strong demand and charge as much as travellers can accept.

Valuation and recommendation

Maintain OUTPERFORM, forecasts and target price of S$25.60, based on an unchanged forward P/E of 15x. Our cum-capital repayment target price incorporates capital distribution of S$1.23 and our ex-capital repayment target of S$24.40.

SIA offers investors strong earnings growth of 49% for FY08 and 20% for FY09, coming from healthy core earnings expansion and a 6.7% reduction in the number of shares once the share cancellation exercise is completed. Core earnings are expected to grow from the A380 deliveries, with the first three to arrive by Feb 08. Yields and profitability should also expand from B777-300ER deployments. Based on the demand and supply fundamentals of the oil market, we may have to revise up our house forecasts of WTI average crude prices, which currently stand at only US$60/barrel in CY07 and US$55/barrel in CY08. However, SIA?s successive fuel surcharge hikes suggest that the airline is in a very strong position to pass on higher-thanexpected jet fuel prices. As a result, we do not expect significant earnings risk from higher fuel costs.

SINGAPORE AIRLINES TO INCREASE FUEL SURCHARGE

As a result of a sustained escalation in the price of jet fuel in recent months, Singapore Airlines will increase its fuel surcharge for tickets issued on or after 2 August 2007. The new levels will apply to Singapore Airlines and SilkAir flights as follows:

1. US$22 (up from US$20) per sector, for flights between Singapore and Kuala Lumpur, Bandar Seri Begawan, Bangkok, Denpasar, Hanoi, Ho Chi Minh City, Jakarta, Manila and Penang;
2. US$98 (up from US$89) per sector, for flights between Singapore and gateways in the United States and Canada on a single-sector basis; and
3. US$63 (up from US$58) per sector, on all other flights.

The price of jet fuel is now hovering around US$90 per barrel, compared to US$81 per barrel when the surcharge was last revised in May.

Singapore Airlines (SIA) ? SIA?s budget airline associate Tiger Airways has appointed former JP Morgan Securities' Hong Kong transportation research head, Peter Negline, as its chief financial officer ? a move suggesting that the budget carrier is indeed earnestly preparing for its IPO. A veteran of two decades in the financial sector, Mr Negline was involved in the Qantas IPO in 1995; the unwinding of cross shareholdings between SIA, Delta and SwissAir in 1999; and primary and secondary share placements for Thai Airways in 2003. Tiger said Mr Negline would focus on optimising the company's financial position as it pursues aggressive fleet expansion and network development across Asia-Pacific. Tiger's president and CEO Tony Davis has previously been quoted as saying that his airline was eyeing a listing possibly late next year. And Mr Negline, with over 20 years experience in aviation financing, research and funds management with global, blue chip financial institutions, is now available to help make that happen.

Singapore Airlines 19.60  22.30    14%      Earnings execution

Singapore Airlines achieved a 1.7% YoY growth in systemwide passenger carriage (in revenue passenger kilometres) while capacity (measured in available seat kilometres) reduced by 1.4% in June 2007. This led to an overall improvement in passenger load factor of 2.5 ppt to 82.4%. The number of passengers carried rose by 3.9% over the same month last year to 1.57 million. Overall cargo traffic (measured in freight tonne kilometres) continued to register growth of 3.1%, which outpaced the systemwide capacity growth of 2.1%. This resulted in a modest growth in cargo load factor of 0.6 ppt.