Tiger Airways turns around loss to $12.7m quarter profit

Thanks to Group revenue soaring 49.4%.

In a release, Tiger Airways Holdings Limited reported an operating profit of $12.7 million for the quarter ended 31 March 2013 (4QFY13), a turnaround from the operating loss of $17.2 million recorded in the previous corresponding period (4QFY12), on the back of a 49.4% jump in Group revenue to $240.6 million, from $161.1 million recorded in 4QFY12.

The revenue improvement was largely driven by a rise in passenger traffic (+38.1%), stronger yield (+7.5%) and higher load factor (+4.5 percentage points to 84.6%). Total expenses rose to $227.9 million or 27.9% higher year-on-year, in line with the increase in the level of business activity.

Commenting on the results, Group CEO Mr Koay Peng Yen said, “We are extremely encouraged to have achieved a second straight quarter of operating profit, and are looking forward to delivering a sustained turnaround upon the completion of the Tiger-Virgin joint venture in mid-July.”

For the year ended 31 March 2013, the Group recorded an operating profit of $7.3 million, a reversal from an operating loss of $83.4 million reported in the previous year. Loss after tax of $45.4 million was a 56.5% improvement from the $104.3 million loss recorded a year ago.

Tiger Singapore reported an operating profit of $21.5 million for 4QFY13, a turnaround from an operating loss of $6.7 million in the previous year. Revenue grew 37.6% to $166.5 million, lifted by higher traffic volume (+27.9%) and stronger yield (+7.2%). Revenue recorded by Tiger Australia increased 82.0% to $71.1 million, in-line with the growth in traffic (+77.5%) and stronger yield (+2.5%). Passenger load factor increased to 85.6% (+4.2 percentage points) in spite of a 68.8% increase in capacity following the launch of new routes from the two bases in Melbourne and Sydney. The higher costs of operations (+51.8% to $86.2 million) due to increased capacity resulted in an operating loss of $15.1 million, which was an improvement over the $17.7 million loss recorded in 4QFY12.

Share of loss from associate airline, SEAir, amounted to $7.3 million for the quarter. SEAir currently has a fleet of five aircraft. Its network currently covers 12 international and domestic routes out of Clark and Manila, including its latest route between Manila and Laoag which commenced in April 2013.

The Group recognised $8.1 million in share of loss from its other associate airline, Mandala, for the quarter. The Group has an unrecognised share of cumulative losses in Mandala amounting to $13.3 million as at 31 March 2013. The airline currently operates a fleet of seven aircraft. More aircraft will be progressively added to build Mandala’s network.

In the financial year ahead, the Group expects to continue its focus on strengthening its operating cash flows and improving its financial position. New capacity and destinations will be introduced at a measured pace, with an emphasis to create higher frequencies on highdemand routes.

It expects to take delivery of another 10 Airbus A320 aircraft during the financial year, which will bring its fleet strength to 53 aircraft by 31 March 2014. The new aircraft will be allocated to the Group’s subsidiary and associate airlines to support their growth plans.

Tiger Singapore is expected to continue to perform strongly as it consolidates its competitive position by offering new routes and increased frequencies. It will increase its capacity by about 25% by the end of FY14.

The Group’s proposed divestment of a 60% stake in Tiger Australia to Virgin Australia was recently approved by the Australia Competition and Consumer Commission. With two strong shareholders, Tiger Australia will be better-positioned to tap opportunities for further expansion in terms of network and market reach. The transaction will also create operating synergies and better cost efficiency for Tiger Australia. It is expected to be completed by mid-July 2013, upon fulfilment of the conditions in Share Purchase Agreement.

The two associate airlines, Mandala and SEAir, continue to build up their presence in their respective markets and will take time to turn profitable. Mandala will benefit from the recent expansion of traffic rights between Singapore and Indonesia, enabling growth of its operations. SEAir is working towards gaining traction in the Philippines market through network expansion, and increased distribution and payment channels.

The Group expects to deliver a positive operating performance following the completion by mid-July of the Tiger-Virgin joint venture in Australia. The Group also expects to continue to make strategic investments in its associates, Mandala and SEAir, in FY14.

The Group successfully raised gross proceeds of $296.9 million from a renounceable rights issue and a non-renounceable preferential offering of perpetual convertible capital securities through a fund-raising exercise that was completed in April 2013. The proceeds will strengthen the Group’s balance sheet to fund its future expansion.