Statement from Chief Minister's Office in Georgetown on Tuesday, 10^th March 2009:

Letter to Najib: Request for RM20 million fund to Firefly under the 2^nd Fiscal Stimulus Package

6 March 2009

YAB Dato’ Seri Najib Tun Razak

Timbalan Perdana Menteri Malaysia / Menteri Kewangan Malaysia

Pejabat Timbalan Perdana Menteri

Aras 4, Blok Barat

Bangunan Perdana Putra

Pusat Pentadbiran Kerajaan Persekutuan

62502 Putrajaya

Dear Sirs,

2^ND FISCAL STIMULUS PACKAGE: FINANCIAL ASSISTANCE FOR FIREFLY’S PENANG HUB STRATEGY

The Managing Director of Firefly has recently briefed me on 11 February 2009 that due to unfavorable economic condition, Firefly is planning to significantly reduce its flights out of its Penang Hub. During stage 1 of the cutback, the routes that are targeted to be suspended from 29 March 2009 are:

1. Penang – Kota Bahru, 7 times weekly

2. Penang – Kuala Terengganu, 7 times weekly

3. Penang – Kuantan, 7 times weekly

4. Penang – Phuket, 4 times weekly

5. Penang – Koh Samui, 4 times weekly

The remaining routes from Firefly’s Penang Hub are as follows:

1. Penang – Subang, 35 times weekly

2. Penang – Langkawi, 14 times weekly

3. Penang – Johor Bahru, 7 times weekly

4. Penang – Medan, 14 times weekly

5. Penang – Banda Aceh, 4 times weekly

At stage 2, expected to be in Q2 2009, there is a possibility that Penang – Medan and Penang – Langkawi will be reduced to 7 times weekly.

With the cut back, plans for the following additional routes are also suspended indefinitely:

1. Penang – Krabi

2. Penang – Huahin

3. Penang – Suratthani

4. Penang - Nakhon Si Thammarat

5. Penang - Narathiwat

6. Penang – Hatyai

7. Penang – Trang

8. Penang – Pattani

9. Penang – Pekan Baru

10. Penang – Padang

As you are aware, Firefly is established with 3 main objectives for the Penang State:

1. To position Penang as a secondary hub in Peninsular Malaysia by linking major domestic cities to Penang as a feeder to medium and long haul airlines operating into/ from Penang,

2. To position Penang as a hub to the IMT-GT region linking a region of 70 million people to Penang to position the state as a business, leisure and socio-economic regional hub, and

3. To act as a catalyst for economic expansion of Penang by improving air connectivity to the island state.

Since commencement of operations on 3 April 2007, Firefly has been aggressively pursuing these 3 objectives by first transitioning its fleet from Fokker 50 to brand new ATR72-500 and adding new routes and frequencies to Penang. As the routes to/ from Penang are essentially developmental in nature, Firefly has sustained significant financial losses during the financial year 2007 (-RM 10 million) and 2008 (-RM12.4 mil). The developmental path would have been positive if not for the sudden and rapid deterioration of the global economy which is beginning to affect Penang in an unprecedented way. At the current economic condition, it is unlikely that Firefly would be able to turnaround the routes from/ into Penang due to the sudden drop in demand. With the accumulated losses from our Penang routes amounting to -RM22.4mil, we regret to say that Firefly is unable to continue the incurrence of losses without any financial assistance from the Penang State or Federal Government.

From a macro perspective, we have no doubt that the long-term strategy of implementing the 3 objectives stated above remains intact. There is no denying that Penang has the right mix of intellectual and physical qualities to be the next “Singapore” of the IMT-GT region. It is with this believe that I so desperately urge the Federal Government to seriously consider, as part of the 2nd Fiscal Stimulus Package, to provide Firefly financial assistance to continue the pursue of the Penang Hub strategy during this period of deep economic depression that is likely to plague our economy for the next 2-3 years.

It is commonly suggested that the multiplier effect of an airline spending is at least 12 times to the total economy. Hence we strongly urge the Federal Government to provide, under the 2nd Fiscal Stimulus Package, adequate and continuous financial support to Firefly in pursue of the Penang Hub strategy. For financial year 2009, we propose a one-off financial assistance of RM20 million be granted to Firefly to cover the accumulated losses and to sustain the Penang Hub operation for the next 2 years.

I sincerely hope that the Federal Government will consider this proposal favorably for the good of Penang and Malaysia.

Thank you.

Yours faithfully

Lim Guan Eng

Chief Minister of Penang

* Chief Minister's Office