There are more insights than has been usual into Tiger’s dismal financial performance in its second quarter filing overnight for its financial year to 31 March next year.

Overall, the Singapore based holding company for its Singapore and Australia based divisions has lost $SIN 70.5 million in its first six months of the current FY, and in the three months to the end of September its Australian domestic arm lost $SIN 27.2 million compared to an operating loss of $SIN 600,000 in the same period a year earlier.

The group’s summary of its results, with an extract below, make it clear that while the self-inflicted wounds it inflicted on its Australian operations, by getting them grounded on safety grounds for five weeks in July and August played a large part in these results, the overall operation has other problems which reflect very poorly on group management.

The Tiger Airways Group (“Group”) recorded a loss after tax for the quarter ended 30 September 2011 of $49.9 million, compared to a $14.1 million profit after tax for the quarter ended 30 September 2010.

Passenger numbers and seat capacity were 23.2% and 16.1% lower, respectively, in the quarter ended 30 September 2011 compared to the same period last year, due to the six-week suspension of Tiger Airways Australia’s services and the subsequent under-utilisation of its fleet as a result of its reduced flying programme. Consequently, revenue dropped 23.4% to $109.9 million from $143.5 million.

Costs increased by 12.9% in the quarter compared to the same quarter last year, which was impacted by the 47.0% increase in fuel prices compared to the same quarter last year. Unit cost metrics were impacted by the lower seat capacity resulting from the Tiger Airways Australia suspension.

The loss after tax for the half year ended 30 September 2011 was $70.5 million compared to a profit after tax of $16.0 million in the half year ended 30 September 2010.

Analysis of the Results

The financial results for the quarter ended 30 September 2011 were impacted by the suspension of Tiger Airways Australia’s services, and the subsequent under-utilisation of the domestic fleet. Tiger Airways Australia recorded an operating loss of $27.2 million in the second quarter of 2012, compared to a $0.6 million operating loss in the same quarter last year.

Tiger Airways Singapore reported an operating loss of $12.0 million for the quarter compared to an operating profit of $6.8 million in the same quarter last year. Whilst revenues increased 33.2% on a 63.9% increase in seat capacity, both revenue yield and load factors were lower than last year. Further, costs increased 64.0% primarily due to the 47.0% increase in the fuel price and a 57.1% increase in the number of flights operated.

Tiger Airways began as a 49% Singapore Airlines owned answer to Qantas low cost subsidiary Jetstar in 2004, and it is a truly dismal reflection on Singapore Airlines in that its various objectives have not been achieved, even as its own holding was diluted, and it has been totally uncompetitive against Malaysia owned Air Asia and Jetstar since its inception.

But never mind the shareholder issues. What about consumers and competition? It can be shown that Tiger’s Singapore division worked well at serving the tourism boom within SE Asia that followed the opening of Singapore’s  Marina Bay Sands casino, hotel and skypark.  But there is no convincing way it can be shown that the boom would have been less without Tiger, given the quality of the attraction and the low fare initiatives of Air Asia, Jetstar and other bargain fare offerings from full service carriers.

In Australia, the Tiger disaster is easier to nail down. The airline’s previous management exhibited deafness if not contempt when it came to listening to CASA, the safety regulator, which eventually, and after a number of clear warnings, grounded it as a threat to public safety.

Even now, Tiger Australia is limited to 22 flight sectors a day, and is forbidden from growing its fleet of A320s until CASA gets everything it wants in terms of operational compliance with Australian safety rules, even those that have been dumbed down to what is euphemistically called world’s best practice.

Monitoring of Tiger fare offerings in recent days shows it doing great deals at less than $60 for one way for those who can navigate its tricky gotchas when it comes to fare conditions, yet it has also been making absurd offers of almost $290 one way on the Sydney-Melbourne route,  making it for some consumers, more costly than Jetstar, Virgin Australia and Qantas. Tiger hasn’t delivered on its promises to expand as a powerful competitive force in this country.

In fact domestic air fare internet deals continue to defy logic, but in the nicest of ways, for consumers, as Qantas is often out there with fares that are cheaper than the short term offers from Jetstar and Virgin Australia.

When Tiger began flying in Australia four years ago it was widely assumed to be part of a longer term strategy by Singapore Airlines to have a seat at the table when regional airline rationalisation took place.  Tiger hasn’t bought Singapore Airlines anything but grief, although it continues to thrive in this market as a full service competitor to Qantas, Emirates, Thai International and the rest.

Then again, Jetstar hasn’t yet realised the more optimistic ambitions of Qantas for a low cost trans border franchise in Asia. It may well. But Asia takes time, generational time, and that doesn’t seem to be something that pleases the I-want-it-now investor mind set either. Especially after Jetstar Pacific turned turkey after being forcibly made  into the low cost subsidiary of legacy state owned Vietnames Airlines.

At the moment, for consumers, Tiger is almost a triviality, offering limited services, and deeply wounded when it comes to whatever brand value it may have garnered prior to being grounded.

That branding disappointment seems set to get worse for Singapore Airlines next year when it launches Australian services by Scoot, its longer range wide-body low cost carrier.  This will see Singapore Airlines associated, whether it likes it or not, with two different low fare brands, while Jetstar is a single brand, and Air Asia’s shorter haul Asian network segues in the marketing sense into its long haul Air Asia X division.

For those who have been in awe of the focus and success of brand Singapore Airlines up until now, Tiger and Scoot remain head scratchers.

 

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