PROPOSED ACQUISITION OF SIX (6) UNDELIVERED AIRBUS A380 ( A380 ) BY WAY OF:

Transcription

1 MALAYSIAN AIRLINE SYSTEM BERHAD ( MAS OR COMPANY ) (A) PROPOSED ACQUISITION OF SIX (6) UNDELIVERED AIRBUS A380 ( A380 ) BY WAY OF: (I) (II) NOVATION AGREEMENT BETWEEN MAS, AIRBUS S.A.S ( AIRBUS ) AND PENERBANGAN MALAYSIA BERHAD ( PMB ); AND LETTER AGREEMENT BETWEEN MAS AND PMB (B) PROPOSED BUNDLING OF FOUR (4) BOEING AIRCRAFT BY WAY OF: (I) (II) SUPPLEMENTAL LEASE AGREEMENT BETWEEN MAS AND PMB FOR THE REVISION OF THE EXISTING OPERATING LEASE RENTALS PAYABLE TO PMB; AND CONDITIONAL SALE AND PURCHASE AGREEMENTS ( SPA ) BETWEEN MAS AND PMB FOR THE BOEING AIRCRAFT FOR A TOTAL CONSIDERATION OF ABOUT RM3.19 BILLION. (COLLECTIVELY REFERRED TO AS THE PROPOSED AQUISITIONS ) 1. INTRODUCTION On behalf of the Board of Directors of MAS ( Board ), Maybank Investment Bank Berhad (formerly known as Aseambankers Malaysia Berhad) ( Maybank IB ) is pleased to announce that the Company had, on 22 December 2009, entered into the following agreements: novation agreement with Airbus and PMB, and letter agreement with PMB for the acquisition of six (6) undelivered A380 ( Proposed A380 Acquisition ); and supplemental lease agreement with PMB for the revision of the existing operating lease rentals for two (2) B777 and two (2) B747 (collectively referred as Boeing Aircraft ) payable to PMB and conditional SPA with PMB for the Boeing Aircraft ( Proposed Boeing Aircraft Bundling ), for a total consideration of about RM3.19 billion. The details of the Proposed Acquisitions are set out in the ensuing sections. 1

2 2. DETAILS OF THE PROPOSED AQUISITIONS 2.1 Proposed A380 Acquisition MAS entered into an aircraft lease and procurement agreement with PMB on 21 November 2003 where PMB will purchase six (6) A380 from Airbus in consideration of MAS agreeing to lease the aforesaid A380 from PMB upon delivery from Airbus ( Aircraft Lease and Procurement Agreement ) On 24 November 2003, PMB entered into a purchase agreement with Airbus for the acquisition of six (6) A380 ( Purchase Agreement ) with first delivery in January The purchase consideration for the six (6) A380 consists of the following: pre-delivery payments ( PDP ) which were paid by PMB to Airbus in accordance with the terms of the Purchase Agreement; and a balance purchase consideration (based on a pre-determined formula) to be paid upon the delivery of the A380 ( A380 Purchase Consideration ), which is equivalent to 75% of the Airframe Basic Price, Propulsion System Reference Price and any adjustments thereto, the details of which are disclosed in Section 2.3.1(a) below The first delivery of the A380 was initially delayed to January 2011 due to production problems and as a result, PMB received liquidated and ascertained damages ( LAD ) from Airbus as compensation. However, the first delivery is now further delayed to August The amount of LAD that Airbus has to pay for the further delay from January 2011 to August 2011 has yet to be determined at this juncture Since early 2008, MAS has had continuous discussions with PMB on the amount of LAD which is due to MAS. These discussions were held with reference to the Aircraft Lease and Procurement Agreement which were entered into based on the understanding that the first delivery of the A380 aircraft will be in January While PMB has acknowledged that MAS is entitled to LAD, the exact amount has not been agreed by the two parties. With the Proposed A380 Acquisition, the unresolved amount of LAD that MAS is entitled to from PMB is no longer in question as PMB has agreed to pay MAS the entire LAD amount. The total compensation receivable from PMB/Airbus in connection with the delay, is expected to be in excess of RM330 million On 22 December 2009, MAS entered into a novation agreement with PMB and Airbus to novate the Purchase Agreement from PMB to MAS ( Novation Agreement ), whereby Airbus has agreed to release PMB from all of its obligations and liabilities under the Purchase Agreement with respect to the six (6) undelivered A380 and MAS has agreed to assume all of PMB s obligations and liabilities under the Purchase Agreement. In consideration for agreeing to the novation, MAS entered into a letter agreement with PMB on the same date to pay PMB a total cash consideration amounting to about RM1.54 billion (which is equivalent to the PDP and the capitalised interest from the funding cost for the PDP up to 31 December 2009), which is also the net book value of the six (6) undelivered A380 currently in PMB s books. 2

3 2.1.6 Upon completion of the Proposed A380 Acquisition, MAS will also assume all of PMB s rights and interests for the six (6) undelivered A380 under the terms and conditions of the Purchase Agreement and Airbus shall, on and from the effective date of the Novation Agreement, deal with MAS and shall honour MAS rights in respect of the Purchase Agreement Summary details of the six (6) undelivered A380 are set out below: Model : Airbus A380 Date of purchase by PMB : 24 November 2003 Original delivery date : First delivery in January 2007 Postponed delivery date : First delivery in August Proposed Boeing Aircraft Bundling MAS is currently leasing the Boeing Aircraft from PMB under operating lease agreements for tenures extending to various dates in the period from 2016 to 2018 ( Boeing Lease Agreements ) The Proposed Boeing Aircraft Bundling involves the concept of bundling, similar to the previous widespread asset unbundling ( WAU ) exercise carried out in In summary, bundling refers to the addition of items to the financial statements of a transferee by virtue of the transfer of economic risks and rewards from the transferor, without altering or affecting any change to the transferor s existing legal relationships with respect to the items being bundled In the Proposed Boeing Aircraft Bundling, the transferor is PMB and the transferee is MAS. The items being bundled are the Boeing Aircraft. The bundling mechanism is used to transfer the Boeing Aircraft from the balance sheet and the profit and loss account of PMB to MAS, without effecting a sale or legal transfer of title or ownership to MAS. This is because the Boeing Aircraft are encumbered by existing legal relationships and commercial constraints impeding a legal transfer In effect, the Proposed Boeing Aircraft Bundling will result in MAS assuming the economic risks and rewards of the Boeing Aircraft which are currently with PMB. Accordingly, MAS will recognise the Boeing Aircraft as assets in its balance sheet together with the corresponding liabilities. These liabilities stem from financing arrangements PMB entered into to fund the purchase of the Boeing Aircraft from the manufacturer ( PMB Financing Arrangements ). 3

4 2.2.5 Pursuant to the Proposed Boeing Aircraft Bundling, MAS had, on 22 December 2009, entered into two (2) arrangements with PMB to achieve the desired bundling as follows: supplemental to the Boeing Lease Agreements for the revision of the existing operating lease rentals for the Boeing Aircraft payable to PMB ( Supplemental Lease Agreement ); and conditional SPA for the Boeing Aircraft ( Conditional SPA ) The Supplemental Lease Agreement is to reduce the original operating lease rentals in the Boeing Lease Agreements. In consideration, MAS shall make an upfront payment of RM190 million to PMB, which shall be treated as a prepayment for the operating lease rentals under the Boeing Lease Agreements ( Prepayment ). The Conditional SPA requires the sale of the Boeing Aircraft by PMB to MAS when PMB is permitted to enter into such an agreement to transfer the legal title of the Boeing Aircraft to MAS The Proposed Boeing Aircraft Bundling will result in MAS recognising a total asset value of about RM1.65 billion and assume additional liabilities of about RM1.46 billion from PMB The summary details of the Boeing Aircraft and Boeing Lease Agreements are set out below: 2.3 Salient terms Aircraft Type Lease start date Lease end date Boeing B November November 2016 Boeing B December December 2016 Boeing B March March 2018 Boeing B May May Proposed A380 Acquisition Purchase Agreement Pursuant to the Purchase Agreement, PMB s main obligations and liabilities are set out below. MAS will subsequently assume these obligations and liabilities under the Novation Agreement: (a) PMB is to pay the balance of the final purchase price on the delivery of the aircraft which is equivalent to 75% of the Airframe Basic Price, Propulsion System Reference Price and any adjustments thereto. In the event PMB does not pay the balance on delivery, Airbus will charge the default penalty interest as provided for in the Purchase Agreement and retain the PDP, deposits and any other payments made by PMB; and 4

5 (b) PMB is to ensure that the Buyer Furnished Equipment ( BFE ) are furnished and delivered to Airbus on the required dates as stipulated in the Purchase Agreement. If there is a delay by PMB, Airbus will adjust the final price of the aircraft to account for the period of delay. Airbus may elect with PMB s approval, to purchase and install the BFEs at PMB s cost or if the delay is beyond 30 days PMB may elect to take delivery of the aircraft excluding the BFEs. Novation Agreement (a) (b) (c) (d) Upon the execution of the Novation Agreement, the Purchase Agreement will apply to and is binding on MAS as the new buyer. MAS will be subject to all obligations, restrictions, limitations and conditions to the same extent as PMB previously, which is inclusive of the salient terms in Sections 2.3.1(a) and (b) above; MAS will be obligated to pay the balance of the final purchase price; Airbus will treat the PDP already paid by PMB as that made by MAS, and MAS will not be required to pay any more PDP under the novated Purchase Agreement; and Any LAD due to further delays by Airbus to the delivery of the aircraft will be paid to MAS. The effectiveness of the Novation Agreement is conditional upon, among others, the matter set out in Section 8 of this Announcement being satisfied. (iii) Letter Agreement MAS will pay to PMB the sum of about RM1.54 billion being payment for PDP, inclusive of PMB s cost of funding for the PDP up to 31 December 2009 as consideration for the novation of the Purchase Agreement Proposed Boeing Aircraft Bundling Supplemental Lease Agreement Pursuant to the Supplemental Lease Agreement, PMB as lessor and MAS as lessee agree to reduce the original operating lease rentals in the Boeing Lease Agreements. The effectiveness of the Supplemental Lease Agreement is conditional upon, among others, the matter set out in Section 8 of this Announcement being satisfied. Conditional SPA (a) On execution of the Conditional SPA (one per Boeing Aircraft), PMB will sell and MAS will buy, the Boeing Aircraft, when PMB acquires title to the relevant Boeing Aircraft upon payment of the relevant purchase price pursuant to PMB s settlement of the 5

6 purchase payment / termination amount under the PMB Financing Arrangements. (b) Title to the Boeing Aircraft will be transferred to MAS on the same date when PMB acquires title. 2.4 Basis of arriving at the consideration and sources of funds The total consideration of about RM3.19 billion for the Proposed Acquisitions were arrived at on a willing buyer-willing seller basis, after taking into consideration the following: (iii) the cash consideration sum for the novation of the Purchase Agreement of about RM1.54 billion; the Prepayment of RM190 million to PMB for the revision of the existing operating lease rentals under the Boeing Lease Agreements; and the balance RM1.46 billion liability amount that the Company will assume based on the total principal outstanding for the Proposed Boeing Aircraft Bundling in USD at an assumed exchange rate of USD1.00:RM3.50 for various tenures till 2016 to The total cash consideration of about RM1.73 billion for the Proposed Acquisitions would be funded by internally generated funds and/or bank borrowings. 2.5 Contingent liabilities and guarantees to be assumed by MAS from the Proposed Acquisitions There are no contingent liabilities and guarantees to be assumed by MAS from the Proposed Acquisitions. 2.6 Estimated additional financial commitment required of the Company in putting the A380 and Boeing Aircraft acquired on stream Apart from the A380 Purchase Consideration, the Company will be required to spend about RM460.0 million on BFE to put the A380 on stream. This BFE expenditure is not an incremental cost resulting from the Proposed A380 Acquisition as MAS would have the exact same financial commitment under the Aircraft Lease and Procurement Agreement where MAS would lease the A380 from PMB. There is no additional financial commitment required of the Company to put the Boeing Aircraft on stream. The capital commitment to put the A380 on stream will be funded by internally generated funds, bank borrowings and/or fund raising exercises prior to the delivery of the A PARTICULARS OF THE VENDOR PMB was incorporated in Malaysia on 5 July 2002, as a wholly-owned subsidiary of the Ministry of Finance Inc. following the WAU financial restructuring undertaken by MAS in The principal activities of PMB are to carry on the business of acquiring, sale and leasing of aircraft and aircraft engines, investment holding and other related activities. As a result of WAU, PMB acquired the economic interest of all aircraft owned by MAS and leased them back to MAS. PMB presently holds 52% of the equity interest in MAS as at 30 November

7 PMB has been a wholly-owned subsidiary of Khazanah Nasional Berhad ( Khazanah ) since 3 December Khazanah, the investment holding arm of the Government of Malaysia, holds direct and indirect, 69.33% of the equity interest in MAS as at 30 November RATIONALE FOR THE PROPOSED ACQUISITIONS Until recently, MAS has been operating as a virtual airline, whereby all of its fleet is leased rather than owned. The Company has decided that it is timely to revert to a more optimal aircraft business model for its fleet of aircraft, with a mixture of leasing and ownership as compared to a wholly-leased business model. This is in view of the premise that ownership of aircraft is normally more economical relative to leasing. The new fleet ownership model would see about 1/3 aircraft being owned, 1/3 being leased and the remaining 1/3 either being leased or owned depending on prevailing market conditions and availability of financing. MAS strategic medium to long-term fleet mix in comparison with regional airlines is shown in the table below: MAS* Cathay Pacific Thai Airways Singapore Airlines Owned 33% - 67% 38% 60% 67% Leased 33% - 67% 62% 40% 33% (Sources: Annual reports and/or interim reports of the respective companies) Note: * As per MAS business plan Accordingly, the long-term projections from the management of MAS ( Management ) on the costs of purchasing the A380 versus leasing it from PMB indicates that the total cost of ownership of the A380 is relatively lower compared to the cost of leasing the aircraft. The potential LAD from Airbus further delay of the first delivery of the A380 from January 2011 to August 2011 will also accrue to MAS. Based on the Management s long-term projections of the operating lease rentals and the future market value of the Boeing Aircraft, the Proposed Boeing Aircraft Bundling will yield a positive net present value ( NPV ) to MAS, which is greater than the Prepayment to PMB. Hence, there will be net financial benefit to MAS from entering into the Supplemental Lease Agreement and Conditional SPA. This financial benefit will accrue to MAS for a period up to the expiry of the Boeing Lease Agreements in years 2016 and Ownership of the A380 and Boeing Aircraft also provides MAS a greater flexibility in fleet management as compared to the current wholly-leased arrangement with PMB, among others, it provides MAS the option to dispose and/or lease out the aircraft as and when may be required by the market conditions in the future. In conclusion, MAS is expected to realise an incremental savings from the Proposed Acquisitions of about RM327.4 million (in terms of NPV of the cashflow), which are mainly from the lease savings over a period of fifteen (15) years for the Proposed A380 Acquisition and the reduction in the future operating lease payments for a period of seven (7) to nine (9) years for the Proposed Boeing Aircraft Bundling. 7

8 5. EFFECTS OF THE PROPOSED AQUISITIONS The Proposed Acquisitions will not have any effect on the issued and paid-up share capital, consolidated net assets and gearing, substantial shareholders shareholdings, dividend policy of the Company, earnings of MAS and its subsidiaries ( MAS Group ) and earnings per share for the financial year ending ( FYE ) 31 December 2009 as the Proposed Acquisitions are to be completed by the first quarter of 2010 and are cash transactions. The Proposed Acquisitions are expected to contribute positively to the future earnings of the MAS Group. 6. PROSPECTS OF THE A380 AND BOEING AIRCRAFT ( ASSETS ) The A380 has demonstrated an excellent operational flexibility in meeting airlines requirements for larger capacity and lower operating costs per passenger. It can carry 35% more passengers than its closest rival and, with nearly 50% more floor space, the A380 enables airlines to deliver unparalleled comfort in every class and more open space for passengers to stretch their legs. In addition, the A380 s efficiency and advanced technology result in 15-20% lower seat-mile costs especially for long-haul routes. Its weight saving composite materials help make A380 a highly fuel-efficient aircraft (Source: extracted from Hence, the new A380 which is more agile and fuel efficient will support MAS core network and enable MAS to enhance passenger traffic and reduce costs. In addition, the Board is of the view that the aviation industry will improve by the time the first delivery of A380 takes place in The Board believes that there will be increasing air traffic growth and demand for long haul flights due to urbanisation and economic growth in Asia then. Hence, the A380, which provides greater seating capacity, would be able to accommodate the growing demand for air transportation, along with the need to link the dynamic mega cities of the world. The Management s projected total operating lease rentals payable to PMB for the A380 pursuant to the Aircraft Lease and Procurement Agreement is higher than the total acquisition cost, resulting in cash accretion to MAS from the Proposed A380 Acquisition. The projected total interest and depreciation expense on the A380 is expected to be lower than the projected operating lease payments, resulting in earnings accretion for MAS. Based on the Management s projections, the existing operating lease rentals for the Boeing Aircraft are expected to be higher than the costs to be incurred (arising from the Prepayment, interest and depreciation expense) from owning the Boeing Aircraft. The total cash savings from the reduced operating lease rental and inflow from the residual value of the aircraft also greatly exceeds the outflow (Prepayment, interest and principal repayment on the liabilities assumed). Hence, the Proposed Boeing Aircraft Bundling is expected to be both earnings and cash accretive to the MAS Group. The Management s projections on the earnings accretion to MAS from the Proposed Acquisitions for the next three (3) years are as follows: Earnings accretion (RM million) FYE 2010 FYE 2011 FYE The financial benefits to MAS for the Proposed A380 Acquisition accrue until 2026 while the Proposed Boeing Aircraft Bundling will be until

9 7. RISK FACTORS OF THE PROPOSED AQUISITIONS 7.1 Business risks MAS financial performance is closely related to the global economic performance and is subject to certain risks inherent to the aviation industry. These include adverse changes in the general economic and business conditions, labour shortages, increase in cost of labour and materials, particularly fuel, foreign exchange fluctuation, equipment failure and reduction in passenger and cargo traffic. Hence, the economic and business conditions when the A380 is scheduled to be delivered in 2011 is crucial, as it will affect the load factor of A380 if the economy remain weak by then, and thus puts pressure on its yield or revenue per available seat kilometre. MAS will strive to limit and/or mitigate such aforementioned risks by among others, improving its competitiveness through: (iii) (iv) effective cost control; implementation of effective marketing strategies such as code sharing, interlining partnerships and other commercial arrangements; aircraft renewal programme; and improving the airline s inflight and ground services. However, no assurance can be given that the aforementioned business risks can be completely mitigated. 7.2 Competition The aviation industry is highly competitive. Recent key trends observed in the industry include the following: (iii) Sharp decline in traffic in the first half of 2009 due to the economic crisis led to heavy fare discounting among airlines contributed to downward pressure on yields; Intense competition and increased capacity from low cost carriers at the regional level which has resulted in proliferation of capacity in the market place; and ASEAN air transport liberalisation and overall less regulated air space that have led to more competition. MAS acknowledges the competition looming ahead and thus in anticipation of these challenges, MAS has launched its Business Transformation Plan ( BTP2 ) in January 2008, encompassing a five (5)-year plan to transform MAS to achieve its vision of becoming the World s Five-Star Value Carrier ( FSVC ), i.e. providing 5-Star products and services at affordable prices. The BTP2 is developed to chart its path in meeting these competitive pressures and achieving MAS mission to be a consistently profitable airline. There are five (5) bold steps which make up the FSVC Virtuous Cycle of Profitable Growth: Step 1 5-Star : Maintain the high quality products and services offered (5-Star) and these have to be constantly matched to the specific needs of MAS customers; 9

10 Step 2 Step 3 Step 4 Step 5 Lower Costs Competitive Fares Get more customers, more revenue Grow network, build capacity : Reduce structural and operational costs (without compromising on safety and security); : With a lower cost base, MAS will be able to offer low and competitive fares to its customers and still be able to make a profit; : With high quality products and services at low/competitive fares, more passengers will choose to fly on MAS. This translates into more revenue; : With more revenue and profit, MAS can invest in growing its network and building its capacity. MAS will open up more routes and acquire more planes and this leads MAS to sustainable, profitable growth. FSVC is MAS path to long term survival and success which will continue to drive its key business activities. For instance, in response to the recent competitive pressures from various airlines amidst the global recession, MAS has accelerated the implementation of BTP2 by focusing on three (3) core areas which is enhancing customer satisfaction - by focusing on what matters most to customers, generating revenue and intensifying structural cost reduction to speed up its transformation into the World s FSVC. While focusing on transforming the business, MAS remains an award winning airline. MAS was awarded, for the 5th consecutive year, the 5 Star Airline award by Skytrax, a United Kingdom based organisation with 20 years experience in airline research. It was also recently voted as Asia s Leading Airline by over 180,000 industry professionals in a global poll conducted by the World Travel Awards. More recently MAS was also awarded the Aircraft Leasing Deal of the Year Asia by Jane s Transport Finance for its success in securing financing worth USD126 million under the Japanese Operating Lease for seven (7) ATR aircraft and also clinched the Best Asia-Pacific Airline MRO (Maintenance, Repair and Overhaul) Operation Award 2009 by Aviation Week and Overhaul & Maintenance. Other industry recognition in 2009 include Top Performing Company (3rd ranking) by Aviation Week, Best Maintenance, Repair and Overhaul (MRO) Centre in Asia Pacific by Frost & Sullivan, Singapore, as well as ACE Award for Excellence (MASkargo), Air Carrier Category by Air Cargo World. Nonetheless, no assurance can be given that any competitive pressure will not have any material and adverse impact on MAS business performance, operating results and financial condition. 10

11 7.3 Forward-looking projections The Management s projections of the lease savings and the earnings or cash accretion for the Proposed Acquisitions are based on estimates and assumptions made by Company, and although believed to be reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ from the future results, performance or achievements expressed or implied in such forward-looking statements, such as, fluctuations in interest rate and foreign exchange rate, and future market value of the aircraft. In light of these uncertainties, the inclusion of the Management s projections in this Announcement should not be regarded as a representation or warranty by MAS or its advisers that the plans and objectives of the MAS Group will be achieved. However, the Board is of the view that the performance of the aviation industry will improve by APPROVALS REQUIRED The Proposed Acquisitions are subject to approvals being obtained from the following: the shareholders of MAS at an extraordinary general meeting ( EGM ) to be convened; and any other relevant regulatory authorities or parties, if required. The highest percentage ratio for the Proposed Acquisitions is 76.21%, based on the purchase consideration of the Proposed Acquisitions, compared with the consolidated net assets of MAS as at the latest audited consolidated financial statements for the financial year ended 31 December The Proposed A380 Acquisition and Proposed Boeing Aircraft Bundling are conditional upon each other. 9. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS Save as disclosed below, none of the Directors, major shareholders of MAS and/or persons connected to them has any interest, direct or indirect, in the Proposed Acquisitions. 9.1 Directors (iii) (iv) Tan Sri Dr. Mohd. Munir bin Abdul Majid, Non-Independent Non-Executive Chairman of MAS, is a representative of Ministry of Finance ( MoF ); Dato Mohamed Azman bin Yahya, Non-Independent Non-Executive Director of MAS, is also a director of Khazanah; Tan Sri Dr. Wan Abdul Aziz bin Wan Abdullah, Non-Independent Non-Executive Director of MAS, is a representative of MoF; and Dato Puteh Rukiah binti Abd. Majid, Alternate Director to Tan Sri Dr. Wan Abdul Aziz bin Wan Abdullah, is also a director of PMB and a representative of MoF. 11

12 Tan Sri Dr. Mohd. Munir bin Abdul Majid, Dato Mohamed Azman bin Yahya, Tan Sri Dr. Wan Abdul Aziz bin Wan Abdullah and Dato Puteh Rukiah binti Abd. Majid ( Interested Directors ) have abstained and shall continue to abstain from voting and deliberating on any Board s resolutions relating to the Proposed Acquisitions. The Interested Directors will also abstain from voting in respect of their direct and indirect interest on the resolutions pertaining to the Proposed Acquisitions at the forthcoming EGM and shall further undertake to ensure that persons connected with them shall abstain from voting in respect of their direct and indirect interests (if any) on the resolutions pertaining to the Proposed Acquisitions at the forthcoming EGM. 9.2 Substantial Shareholders PMB is the immediate holding company of MAS. As at 30 November 2009, PMB holds directly 868,957,232 ordinary shares of RM1.00 each in MAS ( Shares ), representing 52.00% of the total issued and paid-up ordinary share capital of MAS; and Khazanah, the holding company of PMB, is also a substantial shareholder of MAS. As at 30 November 2009, Khazanah holds directly 289,652,411 Shares and indirectly via PMB 868,957,232 Shares, representing 69.33% of the total issued and paid-up ordinary share capital of MAS. PMB and Khazanah will abstain from voting in respect of their, direct and indirect, interests (if any) on the resolutions pertaining to the Proposed Acquisitions at the forthcoming EGM and shall further undertake to ensure that persons connected with them shall abstain from voting in respect of their direct and indirect interests (if any) on the resolutions pertaining to the Proposed Acquisitions at the forthcoming EGM. 10. STATEMENT BY DIRECTORS The Board (save for the Interested Directors who have and will continue to abstain from deliberating on the Proposed Acquisitions), having considered all aspects of the Proposed Acquisitions and after careful deliberation, is of the opinion that the Proposed Acquisitions are in the best interest of the Company. 11. AUDIT COMMITTEE S STATEMENT The Audit Committee of MAS, at its meeting held on 22 December 2009, having considered all aspects of the Proposed Acquisitions, is of the opinion that the Proposed Acquisitions are: (iii) in the best interest of the Company; fair and reasonable based on normal commercial terms; and not detrimental to the interest of the minority shareholders. The Audit Committee has sought the opinion of the Independent Adviser, namely AmInvestment Bank Berhad (a member of AmInvestment Bank Group) ( AmInvestment Bank ) in forming its views in relation to the Proposed Acquisitions and concurred that the terms and conditions of the Proposed Acquisitions are fair and reasonable. 12

13 12. ADVISERS Maybank IB has been appointed by MAS as the Principal Adviser for the Proposed Acquisitions. 13. INDEPENDENT ADVISER The Proposed Acquisitions are deemed as related party transactions as defined under the Listing Requirements of Bursa Malaysia Securities Berhad. In view of the interests of certain Directors and substantial shareholders of MAS as set out in Section 9 above, the Board has appointed AmInvestment Bank as the independent adviser to advise the non-interested Directors and shareholders of MAS in respect of the Proposed Acquisitions. 14. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Board expects the Proposed Acquisitions to be completed by the first quarter of DOCUMENTS AVAILABLE FOR INSPECTION The Novation Agreement, Letter Agreement, Supplemental Lease Agreement and Conditional SPA are available for inspection at the registered office of MAS at 3rd Floor, Administration Building 1, MAS Complex A, Sultan Abdul Aziz Shah Airport, Subang, Selangor Darul Ehsan during normal office hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this Announcement. This Announcement is dated 22 December