Tigerair 3Q Results Takes A Hit From Exceptional Charges

Tiger Airways Holdings Limited (“Tigerair”) has reported a loss after tax of $118.5 million, including $88.3 million in exceptional charges, for the quarter ended 31 December 2013 (3QFY14), compared to a profit after tax of $2.0 million recorded in the previous corresponding quarter (3QFY13).

The exceptional charges consist of a $30.3 million loss on the planned disposal of Tigerair Philippines and an impairment of associates of $58.0 million in the quarter. The Group also recorded $23.1m as its share of losses of associates.

At the operating level, total revenue declined by 30.5% to $172.1 million in 3QFY14, while total expenses fell 21.3% to $180.9 million year-on-year. The contraction in revenue and expenses in the quarter was mainly due to the exclusion of Tigerair Australia as the airline ceased to be a subsidiary with effect from 8 July 2013. Furthermore, Tigerair Singapore reported lower revenue and higher expenses in 3QFY14. As a result, the Group recorded an operating loss of $8.8 million in 3QFY14, compared to previous quarter’s operating profit of $17.9 million.

Mr Koay Peng Yen, Group CEO, said, “Our third quarter operating performance was dragged down by industry overcapacity which had led to weaker yields and lower load factors. We recorded exceptional charges on losses from associates. Consequently the disposal of Tigerair Philippines will put us on a better footing going forward. We continue to address these challenges even as the macro environment remains difficult.”

For the nine months ended 31 December 2013, operating loss widened to $27.8 million, from $5.4 million recorded in the same period a year ago. Group loss after tax was $127.5 million, compared to the previous year’s loss after tax of $30.0 million.

Operations Review
Despite an increase in traffic volume (9.2%), Tigerair Singapore’s revenue declined by 2.9% to $168.0 million, as yield fell 11.3% and load factor dropped 9.8 percentage points to 75.8%. Unit cost rose by 2.8% as the increase in expenses (26.8%) outpaced capacity growth (+23.3%). Consequently, Tigerair Singapore recorded an operating loss of $17.0 million compared to an operating profit of $27.0 million a year ago.

Share of loss from Tigerair Mandala amounted to $11.2 million for the quarter. The airline currently operates a fleet of nine aircraft. Tigerair Mandala’s network covers 18 international and domestic routes.

Share of loss from Tigerair Australia amounted to $7.4 million for the quarter. The airline has a fleet of 12 aircraft and operates on 17 domestic routes.

Share of loss from Tigerair Philippines amounted to $4.5 million for the quarter. Pursuant to the announcement on the divestment of Tigerair Philippines to Cebu Pacific, the Group recorded an estimated loss of $30.3 million. Tigerair Philippines’ fleet of five aircraft covers 12 international and domestic routes.

Outlook
Tigerair Singapore continues to face near-term pressure on yield and load factors in the current seasonally quiet quarter amid an overcapacity situation in the industry. By the end of the financial year, it will take delivery of one more Airbus A320. It will also be absorbing the two Airbus A319s from Tigerair Philippines’ fleet following the completion of its divestment of the associate airline. Tigerair Singapore plans to deploy these aircraft on routes that will maximise their efficiencies.

Tigerair Mandala continues to focus on business turnaround.

The divestment of Tigerair Philippines to Cebu Pacific is expected to be completed by the end of the financial year, and pave the way for the strengthening of the strategic alliance between Tigerair and Cebu Pacific. Subject to regulatory approvals, both airlines will collaborate commercially and operationally on international and domestic air routes from the Philippines, thereby creating the biggest flight network to the region.

Tigerair has also entered into strategic alliances with China Airlines to establish a Taiwan- based budget carrier, an interline agreement with SpiceJet, India and an alliance agreement to deepen the collaboration with interline partner, Scoot. This alliance strategy will allow Tigerair to expand its footprint in the region in a capital efficient manner.