Tiger Air Falls to Lowest Since 2010 IPO on Funds Review

Tiger Airways Holdings Ltd., the unprofitable carrier partly owned by Singapore Airlines Ltd., fell to a record low after saying it’s reviewing funding options.

Tiger Air dropped 5.1 percent to close at 37.5 Singapore cents, the lowest price since Jan. 22, 2010, when the company’s shares began trading in the city state. The budget airline has declined 26 percent this year, compared with a 1.8 percent gain for Singapore’s Straits Times Index.

Tiger Air is reviewing funding options, including a rights issue, and will sublease 12 planes to IndiGo, an Indian low-cost carrier, at a discount in light of overcapacity in the industry, the airline said yesterday. Excess capacity and competition have pushed down fares at budget carriers, forcing some including AirAsia Bhd. to defer plane deliveries or cancel orders.

“Investors are worried that Tiger Air might need to do a rights issue,” K. Ajith, a Singapore-based analyst at UOB Kay Hian Pte, said by phone. The carrier may need at least S$150 million ($118 million) in new funds, he said.

Tiger Air’s net loss widened to S$65.2 million in the quarter ended June from S$32.8 million a year earlier because of costs incurred from closing an Indonesian venture and operations in Australia. A fundraising will help Tiger Air strengthen its balance sheet and meet corporate requirements, the company said in a statement after the market’s close yesterday.

“As and when a decision has been made by the board to proceed with any fund-raising option, the company will make the appropriate announcements,” Tiger Air said.

Cash Flow

The agreement with IndiGo will help significantly cut Tiger Air’s cash-flow burden by about S$162 million during the sublease period of three years to four years, the carrier said. Tiger Air will make a one-time accounting provision of about S$93 million for the excess planes and expects to fully utilize this provision over a six-year period.

“This is definitely a better option than keeping it idle and burning cash on these assets that are not generating income,” Eugene Chua, a Singapore-based analyst at OCBC Investment Research, wrote in a note today. The brokerage is reviewing its sell rating on the stock.

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