SIA rescues bleeding Tigerair after shock S$182.4m Q2 loss

[bellboy]

SINGAPORE Airlines (SIA) has come to the rescue of Tiger Airways again – this time with hard cash. The national carrier will be injecting up to S$140 million to plug the budget carrier's haemorrhage - PHOTO: SPH

 

18 Oct5:50 AM

Singapore

 

SINGAPORE Airlines (SIA) has come to the rescue of Tiger Airways again – this time with hard cash. The national carrier will be injecting up to S$140 million to plug the budget carrier's haemorrhage.

 

The funds will be part of a proposed rights issue Tigerair announced on Friday to raise S$234 million.

With its regional ambitions savaged by fierce competition, Tiger on Friday unveiled a staggering net loss of S$182.4 million for its fiscal second quarter ended Sept 30, 2014, compared with a net profit of S$23.8 million a year ago.

It also proposed a rights issue of about 1.2 billion new shares priced at 20 Singapore cents each, a 38 per cent discount to its close of 32.5 cents a share on Thursday.

SIA, which holds a 40 per cent stake in the company, said it will subscribe to its entitlement and excess rights shares, up to S$140 million. "Singapore Air is rescuing Tigerair," said K Ajith, a Singapore-based analyst at UOB Kay Hian. "With the conversion of securities and rights offering, there will be less risk to the balance sheet. I don't foresee Tigerair needing more funds after this."

Prior to the rights issue, SIA will convert its 189.39 million perpetual convertible capital securities (PCCS) holdings into shares. The conversion will raise SIA's stake in Tigerair from 40 per cent to about 55 per cent, and possibly up to 71 per cent after the rights issue, assuming SIA is the only one to subscribe for its rights and convert its PCCS.

SIA will not be making a general offer as Tigerair's minority shareholders had approved a whitewash resolution in March 2013 to waive their rights to receive a general offer as a result of the PCCS conversion.

 

In another telling development, Tigerair said it was exiting Australia, barely months after it exited Indonesia and the Philippines. It will sell its remaining 40 per cent stake in loss-making Tigerair Australia to Virgin Australia for A$1 – Virgin paid A$35 million for its existing 60 per cent stake barely 14 months ago. The estimated net loss arising from the sale is S$60.1 million.

 

"We need to now stem the losses arising from this joint venture and divert our resources back towards our Singapore-based airline in the execution of the turnaround plan," said Lee Lik Hsin, Tiger's chief executive since May and an SIA veteran for 20 years.

 

Dubbed the "Sale of the Century" by some analysts, the move was largely expected given that Tigerair Australia has been suffering operating losses since it started its services in Australia in 2007.

 

Its financial woes worsened after safety breaches grounded its entire fleet in Australia in 2011.

 

Already, the group's plunge into the red for the second quarter ended Sept 30 included S$161.1 million in one-off accounting provisions, comprising S$59.8 million for the divestment of Tiger Australia and S$99.3 million related to the sublease of surplus aircraft which it was forced to sublet at a discount to address its over-capacity headaches.

While analysts said it made sense for Tigerair to do a reset and focus on its Singapore carrier and its tie-up with Scoot - SIA's other no-frills, low-fare airline - many were surprised by the extent of the "value destruction".

 

"Shareholders must ask SIA and Tigerair for an explanation. Who's running the show? Details are sorely lacking," said an analyst.

 

Tigerair also needs to convince investors it still has a growth strategy, now that its regional wings have been clipped.

"They need to address a strategy going forward because they have divested Australia, they are out of Indonesia, out of the Philippines, so what next now?" said Derrick Heng, analyst at Maybank-Kim Eng. "Are they going to stay as a standalone unit just in Singapore? That will put them at a disadvantage to other players like AirAsia, which is growing across the whole region."

 

It is too early to say if SIA was throwing good money after bad. "On paper, all these make sense. Scoot and Tigerair have lots of synergies they can tap. But how the alliance will pen out, it is still a wait-and-see situation," said an analyst with a foreign bank.

 

Tigerair shares fell almost 11 per cent to a record low of S$0.29 apiece before recovering to end Friday at S$0.31, down 4.6 per cent on the day and nearly 40 per cent so far this year. SIA, a unit of Temasek, was unchanged at S$9.65 a share.

In Australia, local media reported that Virgin Australia signalled it plans to cut a bloated Tiger Australia fleet that has hobbled its own turnaround efforts.

 

http://www.businesstimes.com.sg/companies-markets/sia-rescues-bleeding-tigerair-after-shock-s1824m-q2-loss

 

Edited October 18, 2014 by bellboy

[Spring]

Most budget airlines are bleeding I'm afraid but I hope they stay afloat somehow so that we can get our cheap flights!

[bellboy]

Most budget airlines are bleeding I'm afraid but I hope they stay afloat somehow so that we can get our cheap flights!

 

Air Asia is doing well.

Revenue is USD 1B+

and profit margin 20% thereabouts.

 

Going by the rate they are buying planes, Lion Air should be another stellar performer.

Lion Air is buying 169 A320s and 65 A321 jets

http://www.usatoday.com/story/todayinthesky/2013/03/19/airbus-lands-biggest-deal-ever-from-indonesias-lion-air/1999111/

[Spring]

 

Air Asia is doing well.

Revenue is USD 1B+

and profit margin 20% thereabouts.

 

Going by the rate they are buying planes, Lion Air should be another stellar performer.

Lion Air is buying 169 A320s and 65 A321 jets

http://www.usatoday.com/story/todayinthesky/2013/03/19/airbus-lands-biggest-deal-ever-from-indonesias-lion-air/1999111/

Yes Air Asia admittedly is doing well so kudos to them! But they are more of the exception I feel. Tiger with SIA backing n know how also struggling so I fear for budget airlines in general but I sincerely hope I'm wrong cos this whole concept of budget air travel has made it possible for the average man in the street to be able to afford air travel which was previously not possible!

[Spinelli_ck]

the airline has been losing good money for quite some time. i am shocked that there are still people out there who are shocked by this latest loss. is the loss unexpected?

[Lala81]

Competition very fierce. Tiger, Airasia, Jetstar.

 

Airasia must be very well managed to be able to have such a decent profit margin.

I still treasure my life. No Lion Air for me.

Won't be looking at SIA stock for a long while.

[Mcf777]

its a shame TIGER is losing money.

 

they got all the BEST destinations easily compare to other budget airlines.

 

same thing, I will not go with LION no matter how good they are.

[Jamesc]

AA success must be down to luck.

 

Tiger has the BEST destinations and the BEST management

 

How can Boleh be smarter than Unique.

 

I wonder if we have grown soft and complacent living on past success.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Soya]

AA success must be down to luck.

 

Tiger has the BEST destinations and the BEST management

 

How can Boleh be smarter than Unique.

 

I wonder if we have grown soft and complacent living on past success.

 

 

 

 

 

Coz Air Asia stewardess more chio ok?

[Camrysfa]

and what airline is this?

 

bored to death or dead tired.

 

 

 

 

[Jamesc]

and what airline is this?

 

 

 

 

 

The profitable one?

 

[Lightbringer]

Isnt that's how they are so successful? Serving you soooo dilligently that they are exhausted when landing and stage a show for male passengers to enjoy, distracting them from the perils of air travel. Now, THAT'S WHAT i call EXEMPLARY service. Air asia is the best!!!!

 

and what airline is this?

 

bored to death or dead tired.

 

aaa.jpg

 

 

 

[Jman888]

Air Asia so successful that they were asked to takeover MH

[Karoon]

Air Asia so successful that they were asked to takeover MH

 

MH doing restructuring the right way... even getting the right FTs in, poaching the ceo of the profitable irish airline

Edited October 18, 2014 by Karoon

[Hiphiphoray]

Porter's 5F says this is an extremely difficult industry to survive.

[Chucky2007]

How's tigerair flight and service?

 

I took their flight once in my lifetime in 2010.. and vowed never to take another flight of theirs even if I have to pay additional night of hotel night.. and always happy to read that they are losing money.

 

Wonder how many type of customers are like me? Tried them once and never return and have told at least 5 friends my bad experience with them.

 

I took more than 40 flights a year and none with Tiger..

[bellboy]

I did not like it either. Took once years ago, and decided not to take again...

 

Reason is because Tiger was using the budget terminal. Which totally sucks. Inside looks like polyclinic. After clear immigration, totally no place to sit. To board the plane, gotta queue. And no boarding bridge... gotta walk across the tarmac to the plane.

 

Not sure if its still like the above. But in a competitive industry, you just need to screw up once... thats it.

[Ktglfc]

Most budget airlines are bleeding I'm afraid but I hope they stay afloat somehow so that we can get our cheap flights!

 

I am sure they will go profit soon.. just a matter of management and consolidating the flights..

 

There will be more and more budget passengers who are willingly to board no frills flight for short duration to nearby countries..

So, demand will be always be there, and that is why SIA willing to stomach the initial loss for future gains...

 

In the meantime, continue to enjoy the cheap flights, but pls, improve the boarding system, so that there will be not much delay when checking in.. standards must still be there lah :))

 

 

Coz Air Asia stewardess more chio ok?

 

To be served by a billionaire, is itself a worthwhile flight :))