Penerbangan Malaysia Berhad

COMMENTS ON THE RECENT MEDIA REPORT

We refer to the article published in the Business Times dated 17 May 2006 entitled “PMB wants to revamp aircraft leasing business” and would like to clarify certain points that were raised therein as follows:

1. “Penerbangan Malaysia Berhad (PMB) had submitted a concept paper to the Ministry of Finance in an effort to restructure as its aircraft leasing business is bleeding the company dry”.

PMB had not submitted a concept paper to the Ministry of Finance as alleged in the said article. However, as a GLC, on-going dialogue, discussions and correspondences are maintained with the Ministry of Finance and Khazanah (as well as other relevant authorities).

2. “… they are leasing to MAS at a rate far too low from the market rate and this is making it lose a lot of money”.

The lease agreements with Malaysia Airlines (MAS) for the lease of the aircraft were entered into as part of the Widespread Asset Unbundling (WAU) exercise in 2002. The lease rates agreed upon by both PMB and MAS represent the market rates at that time. In addition, the lease arrangement between MAS and PMB was presented to, and approved by, the minority shareholders of MAS at an extraordinary general meeting convened then.

As is customary in the leasing business, these rates are reviewed and re-set at the expiry of each of the lease period to take into account prevailing market conditions.

We hope the above clarifies any misunderstanding that may have arisen from the publication of the said article.