Singapore Airlines Rescue Tigerair
19th Oct 2014
Low-cost carrier, Tigerair, has been bleeding profusely for years due to several factors in the whole gamut of the airline's operations.
For one, there is a stiff competition in all the routes that it operates. Then, there are faltering joint ventures overseas that pulled down the entire group's overall performance. Its joint ventures overseas include Tigerair Australia, Tigerair Mandala (Indonesia), Tigerair Philippines and Tigerair Taiwan.
Following the takeover of the controlling interest of the budget carrier's holding company, Tiger Airways Holdings, SIA subsequently sold its Australian unit to Virgin Australia for a token of AU$1 (US$0.88).
SIA already infused additional capital to the Tiger Airways Holdings increasing its stakes in the company by 15% to 55%. Aside from the direct stakes acquisition, SIA also indicated that it will guarantee to buy rights issue to raise as much as $190 million, thereby boosting its ownership of the company up to 70 percent.
The reorganization shall be implemented in the soonest possible time to resurrect the budget airline from its present condition before it succumbs to natural death. The entire Tigerair group accumulated a loss of $177 million in the last fiscal year ending March 2014. Immediately after the announcement of the loss, a new CEO was brought in, in the person of Lee Lik Hsin.
The new CEO didn't munch word saying the group's joint ventures overseas were the main reason why Tigerair piled up losses.
Soon after he took the reign, he sold the Philippine unit to rival Cebu Pacific for $15 million. For failing to find possible buyers for its Indonesian venture, he ordered it close and has subleased its entire fleet to IndiGo.
In the latest accounting figures, Tigerair is still in the red despite the sale of its Philippine unit as well as its Australian unit and the closure of the Indonesian unit.
Virgin Australia's purchase of the remaining 40% stakes in Tigerair Australia from Singapore Airlines will definitely give the Virgin group a challenge as the Aussie unit has never been performing well during the last two years.
The group's CEO, John Borghetti, admitted that Tigerair Australia will certainly be a headache to deal with. They might reduce its fleet due to weak demand in the domestic market.