TIGER Airways reported higher than expected net loss after tax of $17.4 million in Q3 2012, compared to a profit of $22.5 million in Q3 2011.
Despite the third quarter (October-December) being the traditional high demand period for air travel, Tiger Airways was unable to turn around both its operations; Tiger Australia reported operating losses of $8.6 million while Tiger Singapore reported operating losses of $4.8 million in Q3 2012. Tiger Airways also recorded a $7 million provision charge on dues from Philippine partner SEAir.
The Australian operations continue to be impacted by under-utilisation of fleet as the airline has been flying a reduced number of sectors since the lifting of its suspension. Of the 10 aircraft stationed in Australia, we reckon only about six are necessary currently.
But efforts in Australia are bearing fruit, as they have received permission to fly 38 sectors now (up from 32) and are looking to establish a second base in Australia by mid-2012.
Over in Singapore, Tiger ramped up capacity by almost 70 per cent in Q3 2012, but the demand on new routes and frequencies has likely been slower than expected.
Apart from the high fixed costs, high fuel costs continued to dent profitability. This will continue to impact Tiger's profitability in the coming quarters as well.
While the group is focused on rebuilding its business in Australia under a new management team and looking to deploy additional aircraft to its new 33 per cent-owned Indonesian associate, PT Mandala Airlines, we believe profitability is still some way off. Maintain 'hold' with a target price of $0.70.
HOLD
HOLD
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