Tiger Air Plunges After Australia Unit Grounded by Regulator; Qantas Jumps
Tiger Airways Holdings Ltd. (TGR) tumbled a record 16 percent in Singapore trading after Australia’s aviation regulator forced the carrier’s local unit to suspend services because of safety concerns.
The carrier, part-owned by Singapore Airlines Ltd., plunged to S$1.00 at the close, after dropping the most since it began trading in January 2010. Qantas Airways Ltd. (QAN) jumped 6.5 percent, while Virgin Blue Holdings Ltd. (VBA) surged 11 percent, the most since September.
Tiger Australia’s fleet of 10 Airbus SAS A320s was grounded by the nation’s Civil Aviation Safety Authority on July 1 until at least July 9 because of a “serious and imminent risk to air safety,” the regulator said. The suspension of services will cost Tiger about S$2 million ($1.6 million) a week, the Singapore-based carrier said.
“We continue to question the longevity of Tiger in Australia,” Anthony Moulder, an analyst at Credit Suisse Group AG in Sydney, said in a note to clients today. “Tiger’s pricing has been disruptive to the wider leisure market, and therefore we expect a less disruptive pricing environment is positive for all competitors.”
The carrier’s rating was cut by at least four brokers, with Credit Suisse and DMG & Partners Securities recommending investors sell their stock.
Tiger’s management has begun meeting with the regulator to try and resolve the safety issues, the airline said. The carrier also named Chin Yau Seng as an additional executive director effective today to support Chief Executive Officer Tony Davis.
“Our goal is to resume our services as quickly as possible whilst restoring the confidence of both CASA and the Australian public at large,” Tiger said in a statement.
Tiger Airways Singapore services are not affected and continue to operate normally. The carrier is 33 percent owned by Singapore Airlines Ltd. (SIA), according to data compiled by Bloomberg.
The Australian safety agency has been monitoring Tiger’s operations in the country this year and earlier imposed conditions, including improving pilot proficiency and maintenance control, it said. To extend Tiger’s grounding, the agency would need to make an application by July 8, said Peter Gibson, a spokesman.
“There’s a process that we’re working our way through,” Gibson said.
The grounding affects 35,000 passengers and comes as much of the country starts school holidays, according to Transport Minister Anthony Albanese. It is a further disruption for Australian travelers who have grappled with flight cancellations since the Puyehue-Cordon Caulle volcanic complex in Southern Chile erupted June 4, sending an ash cloud billowing around the globe.
Qantas, its budget unit Jetstar, and Virgin are helping Tiger passengers affected by the grounding.
“The safety of the travelling public must come first,” Albanese said in a statement. “CASA has not taken this action lightly but formed the view that there was a serious and imminent risk to passengers.”
Tiger began domestic Australian flights in November 2007 and has kept costs and fares down since entering the market through steps including charging extra for food, airport check- in and reserved seating.
The carrier is the smallest of the three airline groups flying domestic routes. Virgin Blue’s Virgin Australia operates 86 aircraft while Qantas and its budget carrier Jetstar had 252 planes and about 5,600 domestic flights a week as of September, their websites show.
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