Tiger Airways (TGR) this week reported an 81% passenger load factor (PLF) in Feb 2012. However, TGR’s decent PLF in Feb 2012 can be primarily attributed to a significant seat capacity reduction of 17% YoY to 474k, as number of passengers flown fell 19% YoY to 384k. Management said demand for its flights was weak in Feb 2012 because 1) the Chinese New Year holiday fell in Jan this year, and 2) Tiger Airways Australia in Feb 2012 was still operating at a less than optimal capacity. Furthermore, SGD-adjusted jet fuel prices (JETKSIFC Index) have, thus far in 4QFY12, averaged 3% higher QoQ. We maintain our SELL rating and fair value estimate of S$0.60/share on TGR due to the less than encouraging recent operating statistics and persistently high jet fuel prices.
81% PLF – result of significant capacity reduction
Tiger Airways (TGR) this week reported an 81% passenger load factor (PLF) in Feb 2012. This is only the second time it has recorded a PLF of more than 80% since the grounding of its Australian operations last year. However, TGR’s decent PLF in Feb 2012 can be primarily attributed to the significant seat capacity reduction of 17% YoY to 474k, as number of passengers flown fell 19% YoY to 384k. Management said demand for its flights was weak in Feb 2012 because 1) the Chinese New Year holiday fell in Jan this year, compared to Feb in 2011, and 2) Tiger Airways Australia in Feb 2012 was still operating at a less than optimal capacity. It is also notable that, for the third consecutive month, TGR has retrospectively adjusted its comparative year-ago monthly operating statistics. TGR said these adjustments are the result of reclassification of operating statistics, without providing further details. While the adjustments are not significant, TGR’s YoY operating statistics comparison will seem a tad worse when matched against previously announced numbers.
High jet fuel prices still on uptrend
Thus far in 4QFY12, SGD-adjusted jet fuel prices (JETKSIFC Index) have averaged 3% higher QoQ. In fact, it has been two and a half years since quarterly average jet fuel prices have seen the current level. With fuel costs contributing to 40-45% of total expenses, persistently high jet fuel prices are likely to continue to depress TGR’s profitability.
Maintain SELL
Despite recent positive developments such as 1) TGR’s 33%-owned joint-venture PT Mandala Airlines receiving its Air Operator’s Certificate and 2) Tiger Airways Australia receiving the approval from authorities to increase daily flying to 64 sectors, we maintain our SELL rating and fair value estimate of S$0.60/share on TGR. This is due to the less than encouraging recent operating statistics, which perhaps suggest the market has been overly optimistic with TGR’s turnaround, and persistently high jet fuel prices, which admittedly are not within TGR’s control.
Tiger Airways (TGR) this week reported an 81% passenger load factor (PLF) in Feb 2012. This is only the second time it has recorded a PLF of more than 80% since the grounding of its Australian operations last year. However, TGR’s decent PLF in Feb 2012 can be primarily attributed to the significant seat capacity reduction of 17% YoY to 474k, as number of passengers flown fell 19% YoY to 384k. Management said demand for its flights was weak in Feb 2012 because 1) the Chinese New Year holiday fell in Jan this year, compared to Feb in 2011, and 2) Tiger Airways Australia in Feb 2012 was still operating at a less than optimal capacity. It is also notable that, for the third consecutive month, TGR has retrospectively adjusted its comparative year-ago monthly operating statistics. TGR said these adjustments are the result of reclassification of operating statistics, without providing further details. While the adjustments are not significant, TGR’s YoY operating statistics comparison will seem a tad worse when matched against previously announced numbers.
High jet fuel prices still on uptrend
Thus far in 4QFY12, SGD-adjusted jet fuel prices (JETKSIFC Index) have averaged 3% higher QoQ. In fact, it has been two and a half years since quarterly average jet fuel prices have seen the current level. With fuel costs contributing to 40-45% of total expenses, persistently high jet fuel prices are likely to continue to depress TGR’s profitability.
Maintain SELL
Despite recent positive developments such as 1) TGR’s 33%-owned joint-venture PT Mandala Airlines receiving its Air Operator’s Certificate and 2) Tiger Airways Australia receiving the approval from authorities to increase daily flying to 64 sectors, we maintain our SELL rating and fair value estimate of S$0.60/share on TGR. This is due to the less than encouraging recent operating statistics, which perhaps suggest the market has been overly optimistic with TGR’s turnaround, and persistently high jet fuel prices, which admittedly are not within TGR’s control.
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