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Tiger Reiterates Commitment To Australia; Expects To Resume Flights

Contributed by Shares Investment

By Dow Jones Newswires   

Tiger Airways Holdings said on 07 July 2011 it remains committed to resolving the ongoing safety concerns in Australia and expects to return to normal services in due course, though analysts expect this to be an uphill task for the Singapore-listed budget carrier.

“Tiger Airways Australia is committed to working with the industry regulator and other authorities to resolve their issues, something we are confident we can do in the coming days and weeks. We are optimistic of returning to normal services while reassuring the public, staff and stakeholders of our long-term commitment to Australia,” the airline said in a statement in Singapore.

Tiger’s Australian unit was grounded by the Civil Aviation Safety Authority on Saturday (02 July 2011) and the regulator said Thursday (07 July 2011) it had applied to the Federal Court in Melbourne to seek an order to extend the airline’s licence suspension until 01 August 2011.

A spokesperson for the regulator said the suspension would continue pending an order from a judge and a preliminary hearing on the application was set for 22 July 2011.

Tiger Airways said the airline won’t oppose the regulator’s application to extend the flight ban and Wednesday tasked Tony Davis, its group chief executive, to take charge of Australian operations.

Frost and Sullivan analyst Kunal Sinha said in a note that while Tiger is likely to ride through the rough patch because of strong performance in other regions and the deep pockets of its founders, the airline may opt to cease its operation in Australia.

An investigation by the Australian Transport Safety Bureau into an incident when a Tiger aircraft approached Tullamarine airport below a safe altitude revealed that the incident was caused by a database error.

According to an ATSB safety report released on 07 July 2011, the plane’s internal navigation database, updated on a 28-day cycle, included a lowest descent altitude for the runway at Tullamarine of 2,000 feet against the 2,500 feet prescribed in the documented arrival procedure.

The aircraft descended to 2,000 feet before being prompted by air traffic controllers to climb to 2,500 feet, according to the report.

On Monday (04 July 2011), Tiger Airways shares had tumbled 16% to close at S$1.00, the lowest since the company listed its shares on the Singapore Exchange in January 2010.

Citigroup said the extended flight ban may cost Tiger a total of S$9 million, not including the indirect financial impact as a result of damaged brand reputation, resulting in lower yields and load factors across its network.

“Tiger will now have to weigh its options of either continuing to base its fleet in Australia and face the uncertainty over when it can resume operations but lose S$2 million a week, or scale down its operations in Australia and exit the business,” Citigroup said in a note to clients. “The worst is not yet over.”

Singapore Airlines, which owns a 32.9% equity stake in Tiger Airways Holdings, said it has no immediate plan to reduce its stake in the budget carrier.

“The Board of Tiger has issued statements about the actions it is taking and as a shareholder we are continuing to monitor developments. Tiger is a separately listed entity and is independently operated, with its own board and management,” a Singapore Airlines spokesman said in an email response to queries from Dow Jones. “We have no involvement in day to day management and that is not changing.”

Capital Group Companies Inc., which holds another 8.1% of Tiger Airways, couldn’t be immediately reached for comment.

Ten out of Tiger’s total fleet of 26 Airbus A320s are based in Australia, from where it earned S$279.2 million in revenue in the fiscal year ended March 31, or 45% of its total, according to information on the company’s website.

Separately, SIA last month announced an agreement with Virgin Australia, formerly known as Virgin Blue Holdings, that will allow the two carriers to coordinate schedules and code-share on each other’s flights as they seek to grow their customer bases.