Tiger Air Seeks More Tie-Ups to Expand Asia Budget Network

Tiger Airways Holdings Ltd. (TGR), the Singapore-based budget carrier, said it may seek more overseas partnerships after agreeing to take stakes in airlines in Indonesia, Thailand and the Philippines.

“We think our franchise is well established” in Singapore, Chief Executive Officer Tony Davis said in a Bloomberg TV interview in the city-state today. “Our objective now is to take that franchise around Asia.”

The carrier, part-owned by Singapore Airlines Ltd., yesterday announced plans to buy a 33 percent stake in Indonesia-based PT Mandala Airlines as it competes with AirAsia Bhd for budget travelers across Southeast Asia. It also reported a 94 percent drop in fourth-quarter profit after its Australian unit suffered from tax charges and a slowdown in demand.

“Tiger’s expansion into developing economies may further lower its cost base as operating expenses are lower in these countries,” Rigan Wong, an analyst at Citigroup Inc., said in a note today. “Tiger Australia may continue to be impacted by uncertain demand recovery and rising competition.” Wong has a “buy” rating on Tiger.

The airline fell 1.3 percent to S$1.53 at the close of trading in Singapore. Its fallen 18 percent this year, while the benchmark Straits Times Index is little changed.

Tiger Australia

Tiger will keep its capacity in Australia unchanged this year, while boosting operations in Singapore 40 percent, it said yesterday. The Australia unit has faced increasing competition from Qantas Airways Ltd. (QAN)’s budget unit Jetstar and from Virgin Australia.

Davis also said that Tiger is confident partner South East Asian Airlines Inc. will win approval for plans to operate flights in the Philippines using Tiger aircraft. The Philippines’ Civil Aeronautics Board yesterday issued a provisional order barring SEAir from implementing the accord on concerns it breached cross-border flight rules.

“As we adopt practices that are fairly commonplace in other parts of the world, inevitably it will take some time for people to get comfortable with that and understand how that works and assure themselves it complies with rules,” Davis said. “We’re sure it does, SEAir is sure it does -- we need to convince the regulator.”

Philippine Deal

Tiger has agreed to buy a stake in SEAir, which will also fly international services from the Philippines. These overseas flights haven’t been affected by the regulator’s order. Tiger is also forming a low-cost venture in Bangkok with Thai Airways International Pcl.

Tiger’s net income dropped to S$1.3 million ($1 million) in the three months ended March 31 from S$22.3 million a year earlier. Operating profit dropped to S$10.2 million from S$11.8 million on higher fuel costs. Sales increased 16 percent to S$163.2 million.

Mandala Airlines, which is undergoing a financial restructuring, will be 51 percent owned by Sandiaga Uno’s Saratoga Group, Tiger said yesterday. Mandala’s previous shareholders and creditors will have a 16 percent. The deal is pending due diligence, Tiger said.

To contact the reporters on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net; Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.