Tiger Airways

Kim Eng 18 Apr 2012

Background: Tiger Airways is a low cost carrier offering short-haul flights spanning Asia and Australia. It operates a fleet of 34 Airbus A320 aircraft, which is based mainly in Singapore and Australia.

Recent development: Tiger’s operating statistics for the month of March continued to disappoint on a YoY basis. The budget airline carried 19% fewer passengers in March 2012 compared to a year ago, and 8% fewer when viewed on a trailing 12-month basis (12 months to March 2012 vs March 2011). With corresponding lower load factors and rising fuel costs, this data likely portends another set of poor 4QFY Mar12/FY Mar12 results, which are scheduled to be announced in mid-May.

A year in the red. In our regional aviation report, Turbulence still (dated 4 April 2012), we highlighted rising fuel cost as a primary headwind facing airlines. Tiger’s fourth-quarter fuel bill is expected to balloon to about S$80m from S$76m in 4Q, and exacerbate losses for the quarter by 25%. This analysis excludes the impact of the weak load factors and seems set to deepen the red ink on Tiger’s financials.

Down Under woes. Much of Tiger’s troubles started when Australia’s Civil Aviation Safety Authority began investigating the airline in April last year. By early July, all its flights in Australia were grounded over safety concerns. The suspension lasted more than a month, resulting in its Australian operations recording a loss of almost S$5m during the quarter.

JVs still in infancy. Although Tiger’s new JVs (SEAir in the Philippines, Mandala in Indonesia) may prove to be strong drivers for its earnings growth in the region, they are still in their infancy. For FY Mar13 at least, a significant earnings contribution is unlikely.