Tiger Airways

[Musicwhiz]

Business Times - 20 May 2011

Tiger's Q4 hit by Australian floods, deferred tax charges

Q4 earnings plunge to $1.3m from $22.3m, but full-year profit surges 41.4%

By VEN SREENIVASAN

FACED with a challenging operating environment in Australia and deferred tax charges there, Tiger Airways saw its earnings for the January-March fourth quarter plummet to $1.3 million from $22.3 million a year earlier.

This was despite a 16 per cent rise in revenue to $163.2 million from $140.6 million. Ancillary revenue during the fourth quarter to end-March rose by 22.9 per cent to $34.4 million, from $28 million a year ago.

For the full year, Tiger reported 41.4 per cent surge in attributable profit to $39.9 million, from $28.2 million a year earlier. This was achieved on the back of a 28 per cent rise in revenue to $622.2 million, from $486.2 million.

Ancillary revenue component rose 35.6 per cent to $127.6 million for the full year.

On a per passenger basis, ancillary revenue was up 9 per cent to $21 per person.

Speaking to reporters via teleconference, Tiger's group CEO Tony Davis said that while Singapore-based Asia-Pacific operations were strong and growing robustly, the situation in Australia was 'challenging' due largely to weather-related issues.

Hit by the Queensland floods which cost the company some A$15 million (S$19.8 million), Tiger Australia chalked up a loss of some A$7.1 million.

Mr Davis said that after two years of losses, the company will freeze capacity in Australia and focus on attaining profitability before committing more resources there.

'We are getting our management team to consolidate our Australian operations,' he said, adding that a strategic network review was now underway.

But he rejected suggestions that Tiger could give up on Australia and focus on Asia, where it is seeing strong growth, both organic and via mergers and acquisitions. 'Australia is still an important aspect of the overall group, though the results show that our growth came largely from the Asia Pacific.'

For the year, the airline enjoyed an increased load factor of 85.6 per cent, raised its fares per passenger by 3 per cent and reduced controllable costs by 2 per cent.

Passenger volumes grew 22.5 per cent, while capacity growth was 21.6 per cent.

The biggest cost component was fuel, with expenditure on jet kerosene rising 41.4 per cent during the January-March quarter to $67.6 million, from $47.8 million. For the full year, Tiger's fuel bill was $229.8 million, a 43.2 per cent rise from $160.5 million a year earlier.

Mr Davis said the airline was hedged over five quarters on a 'declining wedge' to match its volume needs. He said the hedging policy was based on managing cash flow rather than trying to beat oil price. He added that instead of fuel surcharges, the airline depended on boosting ancillary revenue to cushion the full impact of the rise in fuel price.

He added that Tiger also benefited from the strengthening of the Sing dollar against the greenback and the fact that the Australian dollar is a commodity-based currency.

Despite the rising fuel bill, unit cost as measured by cost per available seat km fell 3.8 per cent for the year.

The airline will take delivery of nine more A320s this year, adding to its existing fleet of 26 planes. But none will go to Australia, where it has 10 planes.

Instead, new planes could be deployed in the Philippines (where it already has two leased to SeAir), Indonesia (where it is buying into Mandala) and Thailand (where it is planning to set up a joint-venture budget carrier with Thai).

While consolidating its Australian operations, Tiger has already started boosting its Asian operation's Northern Summer seat capacity by 41 per cent.

On the balance sheet, equity attributable to shareholders was $194.7 million, up from $149.7 million; while cash was $195.8 million, down from $206.7 million. Total liabilities were $806 million, up $368.6 million due to additional loans for plane purchases.

[Nick]

It seems that Tiger Airways has been banned from flying in Australia temporarily due to safety concerns.

"In the toughest penalty ever imposed on Australia's domestic aviation industry, the Civil Aviation Safety Authority (CASA) yesterday grounded every flight of the budget airline, citing safety concerns...."

http://www.couriermail.com.au/business/t...6086225724 [Full Article]

[dydx]

It appears that Tiger Airways is in quite serious trouble with Australia's air safety regulator CASA. As all 10 planes (out of Tiger's latest total fleet of 26, which is scheduled to increased to 35 planes by Mar12) deployed in their domestic operations in Australia - operated by wholly-owned subsidiary Tiger Airways Australia Pty Limited - are now grounded till further notice, in the short-term Tiger Airways will stand to lose revenue and likely also suffer massive losses in its Australia-based operation. This is mainly due to a sudden disappearance of revenue and contribution to cover even the related fixed and other running expenses, and the additional expenses related to compensation for affected passengers and meeting CASA's requirements.

This incident definitely has also affected Tiger Airways' reputation on the safety aspect, and may have longer-term negative implications for the entire group's business. It is relevant to note that Tiger Airways rents quite a big portion of its fleet, and the company's 31Mar11 B/S already showed quite a high level of borrowings. I suppose at a certain point, SIA - as the largest shareholder (with a 33.55% stake) in Tiger Airways - may have to step in to help solve the problems, and even save the day!

[Musicwhiz]

This incident definitely has also affected Tiger Airways' reputation on the safety aspect, and may have longer-term negative implications for the entire group's business. It is relevant to note that Tiger Airways rents quite a big portion of its fleet, and the company's 31Mar11 B/S already showed quite a high level of borrowings. I suppose at a certain point, SIA - as the largest shareholder (with a 33.55% stake) in Tiger Airways - may have to step in to help solve the problems, and even save the day!

Yes it would appear that Tiger Airways is indeed in quite serious trouble! The article did not specifically state why the regulators found it appropriate to issue a 5-day suspension, but I would expect that CASA has its reasons and this would bode very badly for Tiger! I see this as having a longer-term as reputation will be severely dented and customers would switch to other low-cost airlines like Jetstar Asia or ValueAir, thus depriving Tiger of much-needed revenues.

I guess the airline industry is too highly regulated for the players to make consistent profits, and there are many rules, restrictions and regulations which all players have to follow, resulting in very high compliance costs. Furthermore, high capex is a feature of the industry, as even SIA has had to fork out massive amounts of money to either buy or rent planes to expand its capacity. This makes it very unpredictable for airlines in terms of profits and cash flows, and therefore I feel they do not make good investments.

In this case, SIA may indeed have to step in to bail out Tiger. My personal experience with Tiger was not good - I would take Jetstar Asia anytime when it comes to budget airlines!

(Not Vested)

[Musicwhiz]

Business Times - 05 Jul 2011

Shares of Tiger Airways close at all-time low

Brokers downgrade stock as CEO holds talks to resume Aussie operations

By KALPANA RASHIWALA

(SINGAPORE) Shares in budget carrier Tiger Airways nosedived yesterday to close at an all-time low of $1 after Australia's Civil Aviation Safety Authority (CASA) grounded the carrier's Australian operations last Friday on safety concerns.

The news prompted a slew of research houses to downgrade the stock, with CLSA Asia Pacific setting a staggeringly low target price of $0.27.

Tiger's shares dropped to 99.5 cents in intra-day trading before finally closing at $1, down 19 cents or 16 per cent from Friday's closing price.

Tiger Airways Australia's domestic services have been suspended until July 9 pending further investigations after two incidents where its planes are reported to have breached the minimum safety altitude level of 2,500 feet.

This comes after CASA had issued Tiger a 'show cause' notice in March, flagging concerns over issues such as aircraft maintenance and pilot training standards.

CASA has also not ruled out extending the suspension but will only decide after meeting Tiger's management, according to media reports out of Australia yesterday.

Tiger's chief executive Tony Davis is said to have begun talks with CASA officials yesterday to work on getting Tiger Australia airborne. Chin Yau Seng, formerly chief executive of SilkAir, has also been brought onboard this week as an executive director at Tiger.

'We are working with CASA to address the concerns it has raised and are focused on resolving them as swiftly as possible. Our priority is to resume operations as quickly as possible,' a Tiger Airways spokesperson said.

The airline reiterated its commitment to 'a long-term future' in Australia, adding that it has helped reduce air fares by at least 15 per cent over the last four years.

'We understand Tony Davis has flown in to meet with CASA together with SIA executives,' DMG Research noted. 'SIA, which owns 33 per cent of Tiger, has so far been hands off but it appears that they are getting involved for the first time which demonstrates the seriousness of the situation but also provides some assurance that it will help resolve matters.'

The suspension, which will affect some 35,000 travellers, is costing the airline some $2 million per week.

However, Tiger Airways Singapore - which primarily drives group profits - continues to run as per normal.

According to Phillip Securities Research, a week's suspension may not hurt the group significantly since Tiger's Australian operations generated $279 million in sales last year.

'The business in Australia had been in the red for the past four years and is not a source of profit to the group's bottom line. However, we expect substantial impact if Tiger Airways exits the Australia domestic scene completely or if a prolonged suspension is imposed,' analyst Derrick Heng added.

Phillip Securities downgraded its rating from hold to trading sell, with a lower target price of $1.07, while DMG Research slashed its target price from $1.40 to $0.91.

With management's attention diverted, the airline is also unlikely to forge ahead at the moment with proposed joint ventures in Thailand, the Philippines and Indonesia, CLSA's Robert Bruce reckons.

This isn't the first time this year that Tiger has had to navigate stormy weather. In June, an ash cloud from a volcano in Chile drifted into Australian and New Zealand airspace, forcing airlines to halt their services.

Even if Tiger - which holds about 5 per cent of the Australian domestic market - does take to the skies by this weekend, its reputation could end up taking a severe hit in the Australian market if doubts about its safety standards linger, hardly a comforting thought given that rivals Qantas Airways and Virgin Australia already hold a bigger chunk of the domestic market.

'The last time CASA either issued a show cause notice or grounded a fleet was Ansett's 767 fleet, notably being the grounding of planes . . . in Easter 2001. So this does not come lightly . . . and was one of the contributing factors to the demise of Ansett,' wrote Mr Bruce. Ansett, one of Australia's oldest domestic carriers, ended up ceasing operations some six months later.

With investors betting that the two major players could gain additional market share if Tiger ends up having to pull the plug on its Australian operations, shares in Qantas rose A$0.12 to close the day's trading at A$1.97 while Virgin Blue Holdings closed A$0.03 higher at 31.5 Australian cents.

[karlmarx]

the latest news is that tiger is grounded till 1st aug, and their aussie ceo has quit. just before sia announced their long haul low cost carrier, it was trading at $1.50. now it is about a dollar. which is still expensive at 3x p/b. i would be keen if it falls to 30c. =)

[vader1671]

The company is geared up to its eyeballs and is still quite expensive even after the share price dropped to $1. I wonder why.

[Musicwhiz]

Asking for money! Hoho!

Business Times - 26 Aug 2011

Tiger seeks rights issue to raise $155.2m

Capital-raising will be backed by Singapore Airlines and Temasek

By FELDA CHAY

TIGER Airways is seeking a rights issue to raise $155.2 million in net proceeds that it says will oil its engines for expansion in Asia and to smoothen its turbulent ride in Australia, where it has been hit by safety concerns.

The budget carrier has proposed issuing up to 273,423,930 new shares at 58 cents apiece on the basis of one rights share for every two existing shares held by shareholders. This issue price stands at a discount of about 39 per cent to the last traded price of 95.5 cents per share yesterday.

It also represents a discount of about 30 per cent to the theoretical ex-rights price of 83 cents per share.

The capital-raising will be backed by Singapore Airlines (SIA) and Temasek Holdings, which together hold about 40.2 per cent of Tiger's issued share capital. They have undertaken to subscribe for 90 per cent of all the rights shares.

The remaining 10 per cent of the rights shares will be underwritten by the joint managers and underwriters for the rights issue, DBS Bank Ltd and Standard Chartered Securities (Singapore) Pte Limited.

'The board of directors of Tiger Airways Holdings reviews the capital structure of the company and its funding needs on a regular basis. The board sees this rights issue as an appropriate method of raising equity capital,' said Chin Yau Seng, acting chief executive officer of Tiger Airways Holdings. 'The proceeds from the rights issue will enable the company to strengthen its balance sheet and provide the company with the financial flexibility to fund its expansion plans.'

Tiger will use the net proceeds to partially fund the pre-delivery and final delivery payments for the purchase of its committed orders of aircraft which are expected to be delivered by the end of 2015, it said.

The call for cash comes two weeks after its Australia arm resumed operations following a six-week suspension imposed by the country's Civil Aviation Safety Authority (Casa).

While operations have resumed, Casa has limited the number of flights that Tiger can operate in Australia to just 18 a day, compared with 60 before the suspension.

Tiger itself also decided to scale down its Australian operations but has plans to gradually ramp up operations after the initial rationalisation.

The rights issue, which is subject to shareholders' approval at an extraordinary general meeting, among other things, is expected to be completed by mid-November 2011.

[Musicwhiz]

Business Times - 07 Oct 2011

Tiger needs to get its act in order

By VEN SREENIVASAN

THE wounded Tiger took another bruising to its reputation last week after the Australian Competition and Consumer Commission put it on the mat for alleged inaccuracies in marketing email messages to its Australian customers. It is also facing queries from the Civil Aeronautics Board of the Philippines following questions raised by an unnamed complainant about potential safety issues following the recent unprecedented suspension of Tiger Australia.

Tiger's CEO Chin Yau Seng says the airline will correct the erroneous message in Australia, but will apply to dismiss the complaint in the Philippines. The latest issues come just weeks after Thai Airways said it was dumping the proposed joint venture with Tiger to set up a new Bangkok-based budget carrier.

By any measure, 2011 has turned out to be Tiger's annus horribilis. Its six-week suspension in Australia cost it over $12 million, adding to the $32 million operating losses it has racked up since April 2010. It warned last week of markedly higher Q2 losses to end-September, after posting a loss of $20.6 million in the previous quarter. Its passenger numbers have fallen through July and August, and load factors are down to 76 per cent.

Tiger is wounded, but not mortally so. After resuming services on Aug 12 in Australia with just 18 flights a day limited to the Sydney-Melbourne sector, the airline has managed to boost operations to 22 flights serving Melbourne, Sydney, Perth, Brisbane and Gold Coast. Mr Chin and his new CEO in Australia, former Air New Zealand veteran Andrew David, are planning to ramp up services for the traditional year-end southern summer peak season. While they may not get it back to the pre-suspension 60-flights-a-day schedule, getting halfway there would be a good result. Hopefully, the Australian regulators will not throw more spanners in the works for Tiger's recovery plans. Given the recent history of Australian aviation, observers would not have missed noticing the kind of treatment that Tiger attracted - something reserved for upstarts which dare challenge the dominance of Qantas on its own turf.

In a nation where the 'flying kangaroo' has pride of place in the national psyche as the 'Spirit of Australia', newcomers - especially of the budget variety - will always have it tough. That said, Tiger has to get its act in order. The problem for Tiger was not growth potential or strategic vision but rather management and execution. Company insiders say former CEO Tony Davis was so focused on growing the business and keeping costs down that he took the eye off the ball when it came to management and communication.

The mutiny by pilots, sudden departures of its managing directors in Singapore and Australia, and lack of communication with customers were symptoms of inherent management weaknesses. The ground turned even more sour when Singaporean and Australian managers in the two respective countries were replaced largely by Mr Davis' ex-colleagues from BMI Baby in Britain. When Australia's Civil Aviation Safety Authority called on Tiger to ensure it employed 'suitably qualified people (to) fill management and operational positions', it was seen as a subtle message addressing the so-called 'Brit invasion' issue. Also, the single-minded pursuit of low costs and low ticket prices gave regulators and observers in Australia the impression Tiger was cutting corners with safety.

Operating out of relatively high-cost locations such as Singapore and Australia, Tiger should instead have been actively managing yields. In any case AirAsia, with its lower-cost operating bases in Malaysia, Thailand and Indonesia, will always be able to beat Tiger on ticket pricing. The third issue is service quality. Local travel folklore is full of tales about Tiger's passengers being left stranded at airports with no warning or staff in attendance.

These are all issues Mr Chin and his team will have to address, and quickly. But Tiger does have many things going for it. It still has a 32.5 per cent stake in a new joint venture low-cost operation with the Philippines' SEAir and has signed up for a 33 per cent stake in Indonesia's Mandala.

Singapore Airlines' (SIA) decision to significantly increase its stakeholding and interest in Tiger (by taking up the lion's share of the 373 million rights shares) is good news for shareholders and the company. Besides offering management expertise (ex-SilkAir CEO Mr Chin and SIA founding chairman JY Pillay being the most visible), there is also the potential - in the distant future - for Tiger to tie up with SIA's new long-haul low-cost carrier.

As Citigroup put it, the complaints in Australia and the Philippines are not worrisome and are 'probably the result of frustrations of its consumers or lobbying by its competitors and which may be handled without significantly altering Tiger's existing growth ambitions'. Indeed, after a horrible year, Tiger has what it takes to make the leap to profitability. It has the management expertise, the resources and the markets. Now it is a question of executing its recovery and expansion plan.

[Musicwhiz]

Business Times - 15 Nov 2011

Tiger takes $50m Q2 pounding after grounding

It expects significant net loss for the full year due to high fuel prices, Aussie woes

By VEN SREENIVASAN

(SINGAPORE) Tiger Airways has released a set of dismal second-quarter financial numbers which suggest that profitability may still be a long way off.

The cost of its two-week grounding in Australia was evident as the company unveiled a $49.9 million loss for the July-September quarter, against a $14.1 million net profit last year.

Revenue fell 30.5 per cent to $109.9 million from $143.5 million as both seat sales and ancillary revenue dived.

Seat revenue, at $88.1 million, was 22 per cent down from last year's $113.6 million. Ancillary revenue - a critical component for budget carriers - fell 27 per cent to $21.9 million from $29.9 million previously.

Tiger said that the losses were exacerbated by escalating fuel costs and foreign exchange loss from the weakening of the Australian dollar against the Singapore dollar.

'Tiger Airways Australia incurred an operating loss of $27.2 million for the quarter, primarily as a result of the above-mentioned events,' it said in a statement. 'The current limitation of 22 flight sectors daily represented a significant reduction of flight operations compared to the pre-suspension period.'

Tiger Airways Singapore did not do well either, reporting an operating loss of $12 million for the quarter compared to an operating profit of $6.8 million last year.

'While revenues increased 33.2 per cent on a 63.9 per cent increase in seat capacity, both revenue yield and load factors were lower than last year,' Tiger said. 'Further, costs increased 64 per cent primarily due to the 47 per cent increase in the fuel price and a 57.1 per cent increase in the number of flights operated.'

Fuel cost rose to $57.6 million despite a $1.4 million hedging gain.

For the six months from April to September, Tiger posted a loss of $70.5 million, against a $16 million profit last year.

This was due largely to a 37 per cent rise in fuel bill to $147.2 million for the six months. Revenue held steady at $288.7 million, compared to $288.6 million a year ago.

The results translated into a loss per share of 9.14 cents for the quarter and 12.92 cents for the first half.

Tiger's balance sheet was significantly weakened, with cash balances falling some $131 million to around $64 million. But earlier this month, the company raised some $158.4 million from its rights issue of 273 million shares.

Tiger Airways Australia faces contingent liability of A$2.25 million (S$3 million) due to a potential refund of a grant given by the government of South Australia for the setting up of an aircraft base in the state.

Although the worst may be over in Australia, Tiger expects overall group load factor for the third quarter ending December to be lower than the 88 per cent last year.

'The group expects to record a significant net loss for the financial year, due to the losses generated by Tiger Airways Australia as a result of the CASA suspension, and the group's exposure to high and volatile jet fuel prices,' it said.