Tiger Air Falls on Fundraising, Restructuring: Singapore Mover

Tiger Airways Holdings Ltd. (TGR), the unprofitable low-fare carrier part-owned by Singapore Airlines Ltd. (SIA), fell the most in almost a month after saying it’s considering a fundraising plan to improve liquidity.

The stock dropped 7.6 percent, the most since May 5, to 49 Singapore cents in the city, after an 18 percent jump May 30.

Tiger Air is grounding planes, canceling aircraft orders and is reviewing its investment in a venture in Indonesia after six consecutive quarters of losses led largest shareholder Singapore Air to name a new chief executive officer for the low-fare airline. The restructuring efforts are symptomatic of the challanges budget airlines face in Southeast Asia, where competition among half a dozen carriers has pushed fares down.

The airline needs to “retreat from its failed international expansion which they seem to be doing and they obviously have too many planes,” said Timothy Ross, Singapore-based transportation analyst at Credit Suisse Group AG. “I don’t think they require an immediate funding assistance. Tiger benefits from the broader group. With SIA, you have scale behind you.”

The company is in preliminary stages of discussions on its fundraising proposal, Tiger Air said in a statement to the Singapore stock exchange. The airline is “aware of rumors” of possible “corporate action” by Singapore Air, the carrier said, without elaborating. The statement was in response to a stock exchange query after the May 30 stock jump.

Photographer: Munshi Ahmed/Bloomberg

A Tiger Airways Holdings Pte airplane takes off from Changi Airport in Singapore. Close

A Tiger Airways Holdings Pte airplane takes off from Changi Airport in Singapore.

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Photographer: Munshi Ahmed/Bloomberg

A Tiger Airways Holdings Pte airplane takes off from Changi Airport in Singapore.

New CEO

Tiger Air, which named Lee Lik Hsin as its new chief executive last month, isn’t aware of any other possible explanation for the trading, it said in the statement.

While the Asia-Pacific region remains the most promising for travel growth, with a third of Airbus Group NV (AIR) and Boeing Co. (BA) orders, a five-year jet-buying frenzy may give way to a more sober approach as carriers adjust to the challenges of intense competition and inadequate infrastructure.

Economic growth in the region has enabled more people to fly for the first time, prompting start-up budget carriers to start and order hundreds of aircraft. Singapore Air itself has set up two budget airlines - Tiger Air and Scoot Pte. Singapore Air owns 40 percent of Tiger Air and all of Scoot. Low-fare airlines account for more than 50 percent of seats in the city.

Tony Fernandes, the chief executive officer of Asia’s biggest budget carrier AirAsia Bhd. (AIRA), said in February he’s ready to take a “back seat,” by deferring deliveries of seven planes this year and 12 next year. The Sepang, Malaysia-based carrier is due to start an airline in India this month.

Tiger Air exited the Philippine market earlier this year and is already cutting back at its discount venture in Indonesia.

“The first step right now is for Tiger Air to exit Indonesia,” said K. Ajith, an analyst at UOB Kay Hian Pte in Singapore. “That’s the priority.”

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net Linus Chua

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