Tiger Airways

http://www.todayonline.com/business/tige...epage=true

Tigerair CEO resigns amid carrier’s financial woes
BY
WONG WEI HAN
PUBLISHED: MAY 8, 4:14 AM(PAGE 1 OF 1) - PAGINATE
SINGAPORE — Tigerair announced yesterday the resignation of chief executive Koay Peng Yen, who will be replaced by Singapore Airlines executive Lee Lik Hsin, signalling its largest shareholder’s intention to step up its influence at the budget carrier.

The move, effective next Monday, comes barely two years after former shipping industry executive Koay joined Tigerair in August 2012, and follows a string of poor performances overseas that has forced Tigerair to sell its Philippines unit and downsize its Australian presence.

Analysts TODAY spoke to were not surprised by the announcement, given Tigerair’s inability to stay profitable and grow regionally.

“The announcement was not a surprise and I would imagine Mr Koay was pressured a little in this development,” said Mr Brendan Sobie, chief analyst at industry research firm Centre for Aviation.

“Obviously, Tigerair hasn’t done very well and SIA is keen to extend its involvement over a brand that’s an important for its overall strategies. Tigerair is still independent, even with an SIA-backed chief executive. But there are things you can achieve with having someone at the top — at least SIA can be confident that what Tigerair does is in line with its overall ambition,” he added.

Mr Koay’s sudden departure comes days after Tigerair warned of a bleak outlook as it reported net loss for the financial year ended March had jumped nearly five times to S$223 million from S$45.4 million a year ago.

The carrier has found it especially difficult to sustain a profitable overseas presence: It has over the past year sold 60 per cent of its Australian unit and withdrawn entirely from Tigerair Philippines.

In a statement yesterday, Mr Koay described his tenure there as engineering a turnaround for the battered company. “Turning around a company is a process and not an overnight activity. Having laid the groundwork for the turnaround of Tigerair, it is now an appropriate time for me to hand over the reins,” he said.

Analysts say one of Tigerair’s problems was that it had expanded too rapidly into new territories, stretching its financial resources.

“Add to that the intensifying competitive environment in South-east Asia — that’s why few low-cost carriers have actually been able to make money outside their home markets,” Credit Suisse transport research analyst Timothy Ross said.

“But were Mr Koay to be held accountable, it’d be unfair given that many of the ills that Tigerair is facing are resulted from legacy decisions made before his appointment,” Mr Ross said. “It was notable that he reacted to the operating environment by shutting down loss-making businesses, while guiding Tigerair to secure a partnership with Scoot.”

Capitalising on the Tigerair-Scoot tie-up, in which both parties are seeking to further align their commercial activities, will be one of the priorities for incoming CEO Lee, said Mr Sobie.

“Tigerair currently has too much capacity in Singapore, where it’s starting to lose money again. They have to resolve that by working more closely with Scoot to push more transfer traffic, which can happen quite soon, pending the Competition Commission Singapore’s approval for the tie-up,” he added. “He might also have to make a decision on Indonesia’s Tigerair Mandala — whether to reduce shareholding or to maintain focus on that market with the help of SIA’s resources,” he said.

(23-07-2013, 11:31 AM)safetyfirst Wrote:

(22-03-2013, 12:05 AM)safetyfirst Wrote: my suggestion is dont touch the listed airlines, most of them do not have a franchise as strong as it seems.. buffett almost lost all his capital in a well managed airline

After 4 months, i still think tiger sucks. It doesnt have the cash to pay for many of the new planes as it seeks to expand and grow, so it has to borrow. Think about what happens when interest rates go up, if they are struggling today with low interest rates, then what about the times when interest rates are high?

After another 10 months, we realise that tigers cant fly. The company has been raising money via rights, not to grow the company, but to make up the losses quarter after quarter.

Hopefully existing shareholders can learn a lesson about investing in certain capital intensive companies, and stop anchoring themselves at the IPO price of $1.50

(08-05-2014, 09:08 AM)safetyfirst Wrote:

(23-07-2013, 11:31 AM)safetyfirst Wrote:

(22-03-2013, 12:05 AM)safetyfirst Wrote: my suggestion is dont touch the listed airlines, most of them do not have a franchise as strong as it seems.. buffett almost lost all his capital in a well managed airline

After 4 months, i still think tiger sucks. It doesnt have the cash to pay for many of the new planes as it seeks to expand and grow, so it has to borrow. Think about what happens when interest rates go up, if they are struggling today with low interest rates, then what about the times when interest rates are high?

After another 10 months, we realise that tigers cant fly. The company has been raising money via rights, not to grow the company, but to make up the losses quarter after quarter.

Hopefully existing shareholders can learn a lesson about investing in certain capital intensive companies, and stop anchoring themselves at the IPO price of $1.50

Speaking of Tiger airway,
reminds me of my painful experience in Chartered Semicon many years ago.

Highly capital intensive company in a highly competitive market, with losses quarter after quarter, year after year, with no visibility of when it will be turned around.

PUBLISHED MAY 10, 2014
SIA plans new cabin class, sticks by Tiger

BYJOYCE HOOI
joyceh@sph.com.sg @JoyceHooiBT


SINGAPORE Airlines (SIA) is not giving up on wounded Tiger Airways, and is also fighting back with a premium economy class on its own brand.
"As a shareholder, we would certainly want to demand that Tiger work out some plan to see how it can turn around, and I think the Tiger board and management want to do it too," SIA chief executive Goh Choon Phong told the media on the sidelines of a post-earnings briefing yesterday. "So there is clearly an interest from both parties to want to improve the situation."
Tiger, in which SIA has a 40 per cent stake, booked its third straight year of losses last week, reporting that it was $223 million in the red. Days after that, the budget carrier's chief executive, Koay Peng Yen, stepped down. SIA Cargo president Lee Lik Hsin is slated to replace him on Monday.
Asked about the possibilities of privatising Tiger or actively increasing SIA's stake in the budget carrier, Mr Goh said: "At this point in time, there is no plan of that sort. Our main concern and focus is to see how Tiger can turn around."

(07-05-2014, 10:48 PM)pianist Wrote: why not merge profits of sia with tiger...then it will become profitable?

Tiger is an associated company of SIA. From accounting perspective, the profits of tiger is merged into the profits of SIA.

More importantly, you can't change the profitability of a company through accounting. It is through changing the business model and/or improving the operating effectiveness and efficiency.

(10-05-2014, 10:31 PM)csl123 Wrote:

(07-05-2014, 10:48 PM)pianist Wrote: why not merge profits of sia with tiger...then it will become profitable?

Tiger is an associated company of SIA. From accounting perspective, the profits of tiger is merged into the profits of SIA.

More importantly, you can't change the profitability of a company through accounting. It is through changing the business model and/or improving the operating effectiveness and efficiency.

Just curious as to why no one highlighted Tiger's 17% jump today. anyone has any idea? (smell like some deal gg on or what. maybe SIA gg to take over tiger at 50 ish cents.

http://infopub.sgx.com/Apps?A=COW_CorpAn...4i-iJSSznk

http://infopub.sgx.com/FileOpen/Tigerair...eID=299639

The Company is also considering various fund raising options to improve liquidity.
The Company is in preliminary stages of discussions on the abovementioned matters. No
definitive agreement has been signed at this time and there is no assurance of any particular
option progressing or discontinuing.

The Company is aware of rumours circulating in the market of possible corporate action by
Singapore Airlines Limited as to its shareholding in the Company. However, the Company
has no knowledge as to the veracity of such rumours.

http://www.theage.com.au/business/aviati...zwhn5.html

Virgin's Tigerair Australia losing $2 million a week
Date
July 24, 2014 - 5:23PM

Jamie Freed

Losses at Virgin Australia's budget airlineTigerair Australia have risen to “alarming levels” of more than $2 million a week amid heated competition in the domestic aviation market, says CIMB analyst Raymond Yap.

Virgin’s joint venture partner, Singapore-based Tigerair, on Wednesday released its accounts for the quarter ended June 30. Tigerair Australia was no longer consolidated into the accounts and instead treated as an associate because the Singapore-based company’s stake fell to 40 per cent. That means disclosure on the Australian arm has been more opaque.

Virgin owns 60 per cent of Tigerair Australia and will release its half year results next month. However, based on the Singapore accounts, Tigerair Australia’s operating losses reached $S33.8 million ($29 million), or around $2.2 million a week in the second quarter of the calendar year on a 100 per cent basis.

The budget carrier only has 13 planes, meaning each one is losing around $171,000 a week.

In the first half, Tigerair Australia’s operating losses nearly doubled to $48 million, from $27.6 million last year, when translated from Singapore dollars.

Mr Yap said he was concerned the outlook for the Australian low-cost carrier, which competes against Qantas Airways’s Jetstar arm, could worsen in the current financial year.

“This is on the back of heavy competition from Qantas, Jetstar Asia and Virgin Australia, which has created continuing yield pressure,” he said.

“With the exception of Melbourne-Sydney (Tigerair Australia’s largest route) and Melbourne-Perth (Tigerair Australia’s sixth-largest route), all of its other routes are expected to see industry-wide capacity expansion in the current quarter, which will exacerbate the present overcapacity.”

Tigerair Australia’s load factors, or percentage of seats filled, have been falling in recent months after it added two new planes to its fleet.

In May, the load factor plunged 14.9 percentage points to 70.3 per cent versus the same month a year earlier, although Virgin in May said early indications were that loads had improved “materially” in the month of June.

Virgin boss John Borghetti is the chairman of Tigerair Australia’s board and the Virgin network management team has been working with the low-cost carrier to optimise its network.

In May, Tigerair said it would abandon flights between Sydney and Melbourne to Alice Springs and between Melbourne and the Sunshine Coast due to low consumer demand, with the changes taking effect on July 22.

Instead, it will boost its frequency on the Sydney-Gold Coast route to four daily from two, while Virgin will lower its frequencies on that route.

Taken from my latest blog post:

“I’ve always said the easiest way to become a millionaire is to start out as a billionaire and then go into the airline business”. - Richard Branson

Tiger Airways' losses widen in Q1

I actually remember looking at Tiger Airways about 2 years back when the news was roundly more optimistic. It had all the great hallmarks of a story stock. Exciting industry, growing customer base and a good PR. I daresay many an investor has thought about it after taking a budget airline flight.

Alas, a great story does not make a great investment. Traditionally, airlines are just not great businesses to run. This has got nothing to do with how competent management but the very nature of the industry itself.

Tiger_Airways_Airbus_A320-232_CBR_Gilbert-3

The aviation industry has traditionally been brutal for all its entrants. Even established players like Singapore Airlines have struggled to make money consistently. Budget airlines are even worst, constantly competing based on price to attract customers.

On top of that, they face the onslaught of ever increasing costs, and the need to replace their airplanes. No airline which keeps it planes for years will be around for very long.

It may come to no surprise to you that investing in a fleet of airplanes is not cheap. Upgrading an airline fleet is very costly, and therein comes the next problem.

Companies quickly find that there's no market for selling 20 - 30 planes at once.

No airline can afford to buy its fleet based on cash alone (a warning sign!), and hence the presence of massive airline leasing arms that provide financing. To top that off, national carriers are often a source of national pride, providing somewhat an implicit guarantee for the financing of these costly investments.

This is a cautionary note that investing in the airline industry is a tough one to crack.

Even as the market leader, making money in this industry is very tough.

[Image: Untitled21.png]

Consider this, for the past 6 years, Tiger Airways has burned through $2.1 billion in cash... and they are still not done upgrading their fleet. They've just announced an additional $3.8 billion in future CAPEX plans!

Singapore's Tigerair orders Airbus jets worth $3.8 billion - Reuters

The only way that Tigerair has been able to keep up with its expansion was to tap into the debt market, raising cash from loans. More tellingly, Tigerair has raised a significant amount of money through shares issue.

[Image: Untitled4.png]

All of this information was publicly available, and more importantly, available to investors even back in 2012.

As a general rule, I recommend investors avoid industries that are (1) reliant on debt (2) has a business model that cannot sustain itself without massive infusions of cash. By simply following this rule, investors can sleep easier at night.

Regards,
theasiareport.com

In such a tough industry, i am wondering if tigerairways can ever consistently make money or at the very least break even.

Today (29 Jul 2014) , Tigerair 2%PerpC is trading around 80 cents. To buy the debt at this price seems too risky. Even if you offer me the perp at 30 cents, i would still find it too risky. Interestingly, many people are still holding on to the mother shares