Tiger Airways’ pan-Asian ambitions floundering with dire need for growth

[alberttky 0]

With progress still to emerge on a series of pan-Asian joint-ventures, Tiger Airways is nearing a tipping point where it must decide if it can be a baby pan-Asian carrier to the more successful AirAsia and Jetstar, or if reality will constrain it to a limited and disconnected franchise network. The implications may make or break the airline group: stalled progress on joint ventures (JV) and a reduced network in Australia saw Tiger instead deploy capacity on its Singapore network. That proved too much, blowing out costs and causing the usually healthy operation to post a SGD12 million (USD9.3 million) loss for the quarter to 30-Sep-2011.

 

Expected poor performance in Australia as the carrier was impacted from a six-week imposed grounding saw the subsidiary post a SGD27.2 million (USD21 million) loss. While the outlook in Australia is improving – but with no signs of profitability – there is excess capacity there, too, and the group’s addition of five A320s through to Mar-2012 means Tiger is in dire need for one of its joint ventures to succeed. Even if that occurs, Tiger’s ambitions of rivaling AirAsia and Jetstar are gone.

 

Singapore bears grunt of unrealised ambitions

 

Tiger Airways had planned for operations in Thailand and the Philippines to be launched by May-2011 and had allocated aircraft deliveries accordingly. But with the developments stalled – in the case of the Philippines, two weeks before commencement – Tiger had an excess of capacity it chose to deploy to its Singapore network. The Singapore operation is Tiger’s original base and has generally performed financially. Its only other operation, Australia, has had poor financial performance and the airline was cutting back on its network after re-emerging from a six-week grounding in Jul-2011.

 

Tiger in 2QFY2012 increased its number of flights by 57% with a 64% increase in capacity. Tiger traded yield for revenue, which increased 33%, and capacity outstripped demand. “We are gradually building up the demand,” CEO Chin Yau Seng said, adding low margins and poor performance were “because of that lag”. Load factors fell – across the group by 7.3 ppts – and was outmatched by a 64% increase in costs.

 

While Tiger’s loss in Australia was larger, the Singapore loss holds greater significance. The Australian operation is still increasing fleet utilisation after rebuilding its foundation to ensure the problems that led to its grounding are eliminated. While it will be sometime before the operation is profitable, its financial condition will improve, especially after it adds significant capacity from Dec-2012. But it is not clear how quickly the Singapore operation can return to profitability, especially as fuel prices remain high and the market becomes more crowded. Jetstar Asia is expanding rapidly, including with long-haul services, as is AirAsia, an hour north of Singapore.

 

Tiger’s traffic statistics for Oct-2011 indicate a 2.7 ppt drop in group load factors from 2QFY2012’s already low load factors, suggesting the problems of the 2QFY2012 capacity glut will remain for the duration of the financial year.

 

A more worrying scenario is what Tiger will do with new aircraft if its joint ventures continue to show no progress in becoming operational. The group is due to receive five A320s through Mar-2011 (one existing aircraft will be returned to a lessor for a net increase of four). FY2013 is forecast to see a net increase of eight A320s.

 

Tiger had planned in Aug-2011 to move two aircraft from Australia to Asia due to Tiger Australia’s reduced network, but ended up keeping them in Australia. “We won’t be able to absorb the two aircraft [into Asia] within this calendar year. We decided to leave those two aircraft in Australia to facilitate rotation and it’s helping to keep punctuality of on-time performance for Tiger Australia high,” Mr Chin said.

 

If no growth opportunities emerge through joint ventures, it is very likely Tiger will have to look into delaying the aircraft or leasing them to others, although a recent rights issue has secured the payment necessary to accept the aircraft. Delaying the aircraft or leasing them to others will incur penalties but will be far less than a death wish of deploying the capacity into its already too-light Singapore and Australian networks. Those networks will be further pressured in FY2013 as Scoot, Singapore Airlines’ low-cost long-haul carrier, offers new markets.

 

The Singapore operation’s loss should have been about 3-4% higher as the two A320s Tiger had planned to send to Singapore were instead kept in Australia and on the Australian subsidiary’s books. As long as the aircraft remain unused in Australia, they will add approximately SGD870,000 (USD672,000) in leasing costs for Australia while shielding the Singaporean operation on paper.

 

No direct benefit from Scoot

 

Scoot has said it will look for feed from anyone and anywhere for its medium/long-haul flights. Mr Chin said Tiger did not plan at this stage to offer connecting services between Tiger and Scoot except for those where passengers self-connect. Connections introduce a great deal of complexity on reservation and IT systems, but at Changi, the base of Tiger and Scoot, terminal layout poses another problem, Mr Chin said. Tiger is based at the low-cost terminal while Scoot will be based at Changi’s main terminals, which are detached from the low-cost terminal and a lengthy bus ride away.

 

Still working to re-activate Mandala AOC

 

In May-2011, Tiger acquired a 33% stake in Indonesia’s Mandala Airlines, who suspended operations earlier this year. Mandala was due to re-launch by the end of this calendar year using Tiger’s low-cost model, but Mr Chin said “the start-up won't be [operational by] the end of this year,” which places doubts on even an early 2012 launch.

 

Mr Chin was expectedly upbeat, saying “at the present moment it’s all things go”, although the carrier is still working to re-activate its frozen Air Operator's Certificate. While the Indonesian market holds enormous growth potential, it is never easy re-launching a bankrupt carrier – some say it is easier to start afresh – especially as Indonesia clamps down on regulations. Within those involved in the re-launch, there is doubt about the carrier becoming operational again. While AirAsia has an Indonesian subsidiary, it predominately focuses on international services, whereas Mandala is expected to take up a greater share of the domestic market than Indonesia AirAsia.

 

Mandala’s stakeholders, who also include Indonesia’s Saratoga Group with a 51% stake and creditors holding the remaining 16%, are still yet to sort out with Airbus the pre-delivery payments Mandala has made as part of its 2007 order for 25 A320s. Tiger intends to have Mandala use its A320s. Mr Chin said Mandala hoped its payments would be refunded – but that is unlikely to occur in full.

Positive sign for launching domestic operations in Philippines – but competition a different story

 

The Filipino regulator, the Civil Aeronautics Board (CAB), has lifted its cease and desist order against SEAir’s domestic operations, Tiger CFO Chin Sak Hin said. The order was imposed in May-2011 two weeks before Tiger and local carrier SEAir were due to commence domestic Filipino flights under a marketing agreement in which SEAir leases its aircraft from Tiger and sell its tickets through Tiger’s website. SEAir’s competitors complained this was effectively cabotage. The CAB’s decision clears Tiger and SEAir to legally resume their marketing agreement, but Tiger did not specify when domestic flights under the agreement would commence. “As a result of this recent development, SEAir is reviewing its route network, which includes international routes,” Mr Chin said. SEAir was awarded rights to serve China and Malaysia.

 

Tiger already leases two A319s to SEAir, which in Dec-2010 launched a Tiger-branded international division. Mr Chin said Tiger is looking to complete a 32.5% equity investment in SEAir, but did not provide a timeline.

 

While the CAB may have cleared Tiger and SEAir to legally commence their marketing agreement, profitability may be elusive. SEAir will be up against stiff competition from several low-cost carriers including Cebu Pacific, Philippine Airlines LCC partner AirPhil Express and AirAsia, which is planning to launch its own domestic operation early next year.

Thai Tiger becoming a moot point

 

Thai Tiger, a proposed joint venture between Tiger and Thai Airways, has been all but dead for a few months. The Thai Government has not given approval, Thai Airways has said the JV will not occur and the JV terms have expired. Tiger now appears ready to acknowledge this reality.

 

“There was no government approval coming. So that’s where we left it. Subsequently we agreed to stay in touch and at some point meet and agree what to do with this project,” Mr Chin said. While Mr Chin did not say if Tiger had planned to hold conversations with Thai Airways during the past month, he said floods in Thailand had put pressure on Thai. “The last couple of weeks has been a very bad time for us to speak with Thai Airways,” Mr Chin said.

 

Australia, once the basket case, rebounding

 

Approximately half of Tiger’s 2QFY2012 saw the Australian subsidiary grounded, which at the time Tiger said would cost SGD2 million (USD1.5 million) per week, putting the total six-week grounding at an estimated loss of SGD12 million (USD9 million). The remaining SGD15.2 million (USD11.7 million) loss from the subsidiary’s total SGD27.2 million (USD21 million) loss was incurred as the carrier re-launched flights with weak load factors. Notably, Tiger’s post-grounding fare prices – AUD49.95 (USD50.41) for Melbourne-Sydney one-way – have been sustainably higher than pre-grounding when lead-in fares were AUD29.95 (USD30.23) or AUD39.95 (USD40.2). “I guess that shows that customers in Australia are willing to pay those fares,” Mr Chin said.

 

Tiger was permitted to resume operations but limited to 18 sectors per day for August, a restriction in place to ensure Tiger once again did not grow too quickly and so the Australian safety regulator could closely watch the carrier’s operation. The carrier gradually built up its network to operate by late Sept-2011 up to 22 sectors per day. The additional sectors were approved by the Civil Aviation Safety Authority (CASA).

 

Tiger in its 2QFY2012 results was eager to portray itself and further growth as being subject to the whim of CASA looking for good behavior from Tiger. When asked about profitability in Australia, Mr Chin said that “will be determined by how much flying that we can do. Certainly at 22 sectors a day there’s no way we can make money”.

 

The evening after the results briefing, Tiger eagerly announced it received approval from CASA to operate 10 additional sectors, providing the airline with a much-needed boost after poor financial performance group-wide and a stagnating strategy.

 

But CASA approval and its impact on profitability is becoming a non-issue. Tiger received approval for the sectors prior to the results briefing and has been able, at any time, to apply to CASA for additional sectors. CASA has so far not rejected any of Tiger’s requests for growth.

 

The additional sectors will be used not to open new destinations but increase capacity on all of Tiger’s existing routes from Melbourne to Brisbane, Gold Coast, Perth and Sydney. Once the increase takes effect in Dec-2011, Tiger will be operating 43% of its pre-grounding available seat kilometres.

Where to next for Tiger Australia

 

Tiger’s new schedule will see it nearly resume its full pre-grounding schedule to its current four destinations, except on mid-week travel.

 

Mr Chin said Tiger Australia would continue to build on “core domestic routes”. With the carrier to offer its previous schedule on peak days, Tiger will have to await response to the additional flights to see if it can add further capacity – either mid-week travel or grow beyond its pre-grounding schedule – or if it needs to resume operations to its other markets. Various destinations have said they have been promised an eventual return by Tiger.

 

In terms of its former destinations, only Alice Springs is currently served by a single other carrier – full-service Qantas – making the route potentially ripe for Tiger. Melbourne-Adelaide and Melbourne-Canberra are the most popular domestic routes from Melbourne that Tiger does not currently serve.

Elusive profitability but ample on-time performance

 

Until the 2QFY2012 results briefing, Tiger had said its focus in Australia was to return the operation to profitability. But now, Mr Chin said, “Our immediate target is to get the operation to a break-even level”. That suggests a profit may be further off than previously planned.

 

One number that has gone up positively for Tiger is its on-time performance in Australia. Previously the worst performing domestic carrier, earning the airline notoriety from the public, Tiger in Sep-2011 was the best-performing carrier with 91% of flights on-time with no cancellations. Mr Chin did note that was based on a reduced operation. The performance was helped by keeping two A320s in Australia as operational spares.

 

Tiger places confidence in Andrew David for Australia, but elsewhere needs silver bullets

 

Although Tiger Australia’s new CEO Andrew David – who replaced the group’s founder, Tony Davis, who has left the company – has been on the job for only a month, Mr Chin placed great confidence in him to lead the Australian operation, although Mr David is understood to have come into a bit more than he bargained for. His reputation to cross Ts and dot Is will see Tiger Australia occupy a sustainable and safe operation that works its way towards break-even and the now more elusive goal of profitability.

 

“We believe we got the best candidate around. He has very high expectations to meet,” Mr Chin said of Mr David. “Given his experience, we're quite confident he can take the airline to very high levels but it's still early days.”

 

But elsewhere Tiger is out of luck. Its venture in Thailand can be considered off while there have been no announced projections for the Mandala or SEAir partnerships, despite SEAir and Tiger being able to market flights once again. Even if those ventures are realised, their next struggle will be with competition as Tiger’s larger pan-Asian competitors AirAsia and Jetstar reach into new and bigger markets. This first sailing of the Asian LCC boat has departed without Tiger, which must now contend with a second-tier status – if it can be maintained.

 

 

http://www.centreforaviation.com/analysis/tiger-airways-pan-asian-ambitions-floundering-with-dire-need-for-growth-62976

[reezal 0]

Maybe Tiger Airways should consider setting up a Malaysian Subsidiary. if this happened, I think it would be good for us customers, more alternative, competitive ticket price.

[Mohd Suhaimi Fariz 2]

Maybe Tiger Airways should consider setting up a Malaysian Subsidiary. if this happened, I think it would be good for us customers, more alternative, competitive ticket price.

 

Impossible would be the most optimistic anyone could ever say about the chances of Tiger opening shop in Malaysia.

[flee 5]

This just shows that it is not so easy to run an airline, LCC or otherwise.

 

Thai has already let the MoU with Tiger lapse. So Thai Tiger is no longer opening up. As for Malaysian Tiger, the prospects are virtually nil as it would compete too much with Singapore Tiger.

 

Bear in mind that Tiger is now fighting to salvage its reputation and operations. It is just thinking about survival. It is not doing well.

[reezal 0]

Impossible would be the most optimistic anyone could ever say about the chances of Tiger opening shop in Malaysia.

 

well, I agreed with you, it sound impossible. But with the rumours going on that AirAsia (Singapore) will be given AOC by the Singaporean Government this february. I think It would be smart for Tiger, if they intend to open up a shop here, to use that as a bargaining chip. Correct me if i'm wrong, wasn't Tiger used to deal with Penerbangan Malaysia few years back that they were interested to lease aircrafts from Penerbangan Malaysia and setting up a base in Subang. I think I read it somewhere many years ago.

[Hafiz BAM 0]

INTERVIEW: Tiger Airways Expects Australia Operations To Return To Normal By Mid-2012

DECEMBER 20, 2011, 5:56 A.M. ET

-- Tiger Airways expects Australia operations to return to normal by mid-2012

 

-- Tiger Airways expects to fly from a second base in Australia

 

-- Tiger Airways expects to get Indonesia's Mandala flying in first half 2012

 

By Gaurav Raghuvanshi

Of DOW JONES NEWSWIRES

 

 

SINGAPORE (Dow Jones)--Tiger Airways Holdings Ltd. (J7X.SG) expects its Australian unit to return to normal flight operations by the middle of next year and is focused on achieving a "break-even" financial performance after predicting a net loss for the fiscal year that ends in March.

 

Tiger Australia, which is still recovering from a costly six-week grounding on safety concerns earlier this year, is looking to expand to a second base and raise the utilization rates of its 10 Airbus A320 family aircraft based in the nation, Chin Yau Seng, the chief executive of the group, said in an interview in Singapore on Tuesday.

 

"We are currently looking at different options for the second base but we are not at a point where we've made a firm decision," Chin said. Tiger Australia is currently flying the equivalent of seven aircraft on 32 sectors with Melbourne's Tullamarine airport as its base.

 

Tiger Airways said last month it expects a "significant" full-year net loss, after reporting that its net loss widened to S$49.9 million in the fiscal second quarter from S$20.6 million in the previous quarter, and compared with a net profit of S$14.1 million a year earlier.

 

Before it was grounded by the Civil Aviation Safety Authority on July 2, Tiger flew 60 sectors in Australia. The regulator imposed stiff conditions, including a limit on the sectors it could fly, when the ban was lifted.

 

Meanwhile, Tiger's flights in Australia delivered an on-time result of 88% in November and have topped the punctuality chart in the past three months. The airline had just one cancellation in about 2,000 flights it has operated since it returned to the air on Aug. 12, Chin said.

 

Tiger, which owns a 33% equity stake in PT Mandala Airlines, expects the Indonesian carrier to resume flying in the first half of 2012, Chin said but declined to give an exact date.

 

Mandala is undergoing a financial restructuring process after the airline ran into financial trouble and was grounded. The largest shareholder in the restructured Mandala will be the Saratoga Group, which will hold a 51.0% stake. The remaining 16.0% will be held by the previous shareholders and creditors of Mandala.

 

Tiger doesn't plan to expand its Singapore fleet in 2012 as the local market "digests" the capacity generated by the 20 planes located in the island nation, Chin said. However, the airline will announce new flights using the existing planes, he said.

 

Tiger, which is 32.8% owned by Singapore Airlines Ltd. (C6L.SG), is on track to receive 37 new Airbus A320 aircraft through 2015 in a 50-plane order that was placed in 2007.

 

The airline will explore growth opportunities in Asia, the fastest growing aviation market in the world, and may, at some point, look at Thailand where it abandoned a proposed joint venture with Thai Airways International PCL (THAI.TH) earlier this month as the two companies were unable to get approvals from local authorities to establish a low-cost airline.

 

 

-By Gaurav Raghuvanshi, Dow Jones Newswires; +65 64154 154; gaurav.raghuvanshi@dowjones.com

 

Source: http://online.wsj.com/article/BT-CO-20111220-703499.html

 

------------------------------------------------

 

 

Following today's announcement of Dhaka, Bangladesh as its next route (which I find rather odd, but probably logical since there's no low-cost competition on this route), I wonder where Tiger will fly to next from Singapore. Though it might be good for it to compete with Jetstar to Siem Reap and Phnom Penh in retaliation for Jetstar's entry into the SIN-HAN route this month lol. Jetstar's non-daily flights and high prices on the Cambodian routes can be a turn-off.

[flee 5]

Tigerair restructures after recording a FY2014 loss. A Singapore Airlines takeover seems sensible

 

Tigerair is further restructuring its operation in a bid to turn around its sagging financial performance. The Singapore-based low-cost carrier group incurred a net loss of SGD223 million (USD177 million) in the year ending 31-Mar-2014 compared to a loss of SGD45 million (USD36 million) the prior year.

Market conditions in Singapore have become challenging with excessive capacity levels provoking a reduction in yields and load factor. Tigerair Singapore reported an operating loss of SGD59 million (USD47 million) in FY2014 compared to a profit of SGD57 million (USD46 million) in FY2013.

All of the group’s overseas affiliates continue to be unprofitable, dragging Tigerair’s bottom line and forcing the group to adjust its fleet plan. The situation at its Indonesian affiliate is particularly challenging, prompting the group to look at divesting its investment in Tigerair Mandala. The group is grounding five of Mandala’s nine A320s and three of the five aircraft being returned from Tigerair Philippines. The removal of the eight aircraft along with the Mar-2014 cancellation of nine A320 orders which would have been delivered in FY2015 and FY2016 are two components of a turnaround initiative.

Tigerair losses widen considerably in 4QFY2014 and FY2014

Tiger Airways Holdings saw its loss widen in the quarter ending 31-Mar-2014 (4QFY2014) to SGD96 million (USD76 million) from SGD 15 million (USD12 million) in 4QFY2013. Exceptional charges and losses from associate or joint venture carriers accounted for most of the loss. The group’s operating loss was SGD24 million (USD19 million) in 4QFY2014 compared to an operating profit of SGD13 million (USD11 million) in 4QFY2013.

On a full year basis, the net loss also widened significantly, from SGD45 million (USD36 million) to SGD223 million (USD177 million), again due mainly to exceptional charges and losses from associates. The group’s operating loss was SGD52 million (USD41 million) in FY2014 compared to an operating profit of SGD7 million (USD6 million) in FY2013.

Revenues for the year were down by 15% and for the quarter by 33%. But this was driven by the removal of Tigerair Australia revenues from the group’s results as a 60% stake in the carrier was sold in Jul-2013 to Virgin Australia.

Tigerair Australia continues to be unprofitable

Tiger Airways Holdings incurred a loss of SGD5.4 million (USD 4.3 million) in 4QFY2014 related to its stake in Tigerair Australia. As a result the Australian carrier incurred a loss of about SGD14 million (USD11 million) in 4QFY2014, representing a slight improvement compared to the SGD15 million (USD12 million) loss from 4QFY2013.

Upon forging their partnership Tigerair and Virgin Australia were initially optimistic of an improvement in Tigerair Australia’s financials. The airline is still recovering from its previous setbacks and is now on a growth path, with a move also to replace some Virgin Australia services on lower yielding routes. But challenging market conditions in Australia have so far challenged Tigerair Australia’s ability to turn around. Tigerair Australia currently operates 13 of the group’s fleet of 52 A320 family aircraft, up from a fleet of 11 A320s at the end of FY2013.

Tigerair Mandala continues to bleed

 

Full analysis here: http://centreforaviation.com/analysis/tigerair-restructures-after-recording-a-fy2014-loss-a-singapore-airlines-takeover-seems-sensible-166436

[flee 5]

Battered Tiger Airways replaces CEO with SIA executive

 

May 7 (Reuters) - Singapore's Tiger Airways Holdings Ltd said it would be replacing its CEO with an executive from its largest shareholder, Singapore Airlines Ltd, days after the budget carrier reported a big widening in its losses.

Lee Lik Hsin, a 20-year veteran of SIA, which owns 40 percent of Tiger, will become chief executive from May 12, replacing Koay Peng Yen who joined Tiger less than two years ago, Tiger said in a statement on Wednesday. http://r.reuters.com/guc29v

"Tigerair Singapore, which had been growing at the rate of 30 percent in the past 3 years, hit turbulence when the market sagged in mid-2013 through the imbalance of capacity and demand," Tiger said.

"Nonetheless by the time of Mr Koay's departure, Tigerair Singapore had started the process of consolidating its services in preparation for a decisive turnaround in its prospects."

Tiger's shares have declined nearly 40 percent over the past year and are trading near a record low.

Source: http://www.reuters.com/article/2014/05/07/tiger-air-ceo-idUSL3N0NT02W20140507

Edited May 7, 2014 by flee

[Mohd Suhaimi Fariz 2]

SQ is stupid for not incorporating Tigerair into Scoot & exploit synergies ala AirAsia.

 

Might as well sell off their shareholding & concentrate on Scoot.

[flee 5]

Branding is so important - that was what Airasia did well. Nobody cares which Airasia they fly on - to them its the same.

 

Tiger's brand name is tarnished - so maybe they should rebrand both Tiger and Scoot and come up with something more positive and dynamic.

[leon t 0]

Tiger really needs a true blue business or corporate man to run the airline - and not anyone from the govt-linked/owned company like the recently outgoing CEO from NOL. And its incoming CEO from SIA will I believe not really be able to do much - partly bec he has been mainstream legacy carrier SIA for too long - and this is totally different from running a LCC and highly competitive nature of it.