Tiger Airways

Kim Eng on 23 May 2012

Background: Tiger Airways (Tiger) is a low-cost carrier offering short-haul flights spanning Asia and Australia. It operates a fleet of thirty A320 aircraft, and has stakes in regional carriers such as PT Mandala (Indonesia) and Southeast Asian Airlines (Philippines).

Why are we highlighting this stock? Tiger released their FY12 results recently, which showed an operating and net loss primarily due to the grounding of their Australian operations in Jul-Aug 2011, as well as taking a hit from increased fuel costs. However, their passenger statistics seem to be recovering from the Australian saga, with further affirmation from the Civil Aviation Safety Authority of Australia that Tiger could resume flying up to 64 daily sectors by 2H 2012.

Capping a disappointing year. Although Tiger managed to maintain revenues at almost similar levels YoY, escalating costs resulted in net losses for the company. Fuel cost was again the main culprit, with a full-year increase of 30% (+SGD 63 mil) contributing half of the overall FY12 expense escalation of SGD 127 mil.

Passenger levels recovering. Encouragingly, Tiger’s latest statistics depicting passengers carried have been showing a firm uptrend, although load factors are still below pre-grounding levels due to additional capacity introduced in FY12. Tiger will be moderating capacity growth to 7% in 1H13 to allow for demand to catch up.

Looking forward to FY13. Australian authorities have given the green light for Tiger to resume flying up to 64 daily sectors (from 38 daily sectors) from July 2012. This allows Tiger to resume Australian operations at levels similar to those before the grounding, with Sydney being planned as its second domestic base. Although not likely to contribute materially to profits, its tie-ups with PT Mandala and SEAir should also begin to take shape next year.