Loss-making Tigerair seeks turnaround by clipping own wings

Tigerair lost $223 million in the year to March 31, compared with $45.4 million in the previous 12 months. Its ventures in the Philippines and Indonesia have also not worked out well.
Tigerair lost $223 million in the year to March 31, compared with $45.4 million in the previous 12 months. Its ventures in the Philippines and Indonesia have also not worked out well.ST FILE PHOTO

Tigerair is grounding eight planes and cutting unprofitable flights in an unprecedented move to turn its loss-making business around.

Battered by bruising competition, which has pushed the carrier into its biggest loss ever, Tiger-air will park the planes - about 15 per cent of its total fleet - until the end of March next year.

The decision to downsize comes about two months after the airline cancelled an order for nine single-aisle planes that were due to arrive this year and next.

There are just too many flights serving the region and not enough demand to fill seats, said group chief executive officer Koay Peng Yen during a media tele-conference following the release of Tigerair's financial results yesterday.

In the year to March 31, the carrier lost $223 million, compared with $45.4 million in the 12 months before that.

Mr Koay said: "We are taking firm steps to manage and right-size our fleet and network, and to address the losses we have seen... We have gone through turbulent times the past year."

With eight planes gone, Tiger-air will be left with 44 jets.

As a result of its cutbacks, passengers will have fewer carriers to choose from on some routes and pay possibly higher fares.

Tigerair will make adjustments to its route network, said Mr Koay.

Flights will be cut to cities like Haikou, Macau and Cebu, while services to stronger markets like Manila, Jakarta and Saigon will be beefed up. It will stop flying to the Indonesian cities of Lombok and Yogjakarta altogether.

Budget carriers, which first muscled their way into Asia a decade ago, have expanded massively in the last few years and this has taken a toll on profits and yields, said aviation analysts.

UOB Kay Hian's K. Ajith said: "Clearly, there is excess capacity in South-east Asia. Everybody from AirAsia to Tiger to Jetstar is adjusting capacity. You can only stimulate demand to a certain extent."

In the last financial year, for example, Tigerair Singapore grew its total capacity - a measure of the total number of seats multiplied by distance flown - by 27 per cent but managed to grow demand by just 13 per cent.

"The industry will continue to grow but not at the rates that were seen the last few years," Mr Ajith said.

A downside for Tigerair and other Singapore-based carriers is the lack of a large domestic market, he said.

Attempts by Tigerair to move into other markets through ventures in the Philippines and Indonesia have not worked out well, mainly due to bigger and stronger rivals.

Having sold its 40 per cent stake in Tigerair Philippines, the carrier is now reassessing its one-third ownership of Indonesia's Tigerair Mandala.

Mr Koay said all options, including a possible sale of the stake, which was previously reported, are being considered.

Tough times for carriers have had an impact on airports, including Changi. There were 4.49 million passengers at the Singapore airport in March - a 2.5 per cent drop from March last year. It was the second year-on-year dip in monthly traffic since July 2009.