Tigerair mulls new rights issue to fund escalating losses

It might trim its fleet yet again.

Loss-making Tiger Airways is mulling a new rights issue to cover its ballooning losses, after revealing that it is subleasing its 12 idled planes to Indian low-cost carrier IndiGo.

According to CIMB, the rights issue will likely be used to fund losses in Singapore and Australia, as well as the negative carry on the 12 planes. This would be Tiger’s third rights issue following its IPO in January 2010 which raised S$224m. Tiger completed a 1-for-2 rights issue at S$0.58/share (raising S$155m) in November 2011, and a 1-for-5 rights issue at S$0.47/share (raising S$76m) and a perpetual convertible (raising S$218m) in April 2013.

CIMB also noted that carrier’s lease rates to IndiGo came in lower than earlier expectations, and the carrier might trim its fleet by 2-4 planes if the need arises. De-rating catalysts are waiting to pounce on TigerAir, even if losses are projected to narrow in the years ahead.

“While the sublease of 12 A320s to IndiGo will generate S$162m in lease incomes over the 3-4 year lease terms to partially offset the lease expenses and is clearly preferable than leaving the planes idle, we were surprised by the size of the S$93m provision, suggesting that the lease rates to IndiGo may have been lower than Tiger’s earlier expectations. In this sense, we view yesterday’s announcement as a negative to Tiger,” stated CIMB.