It may still see benefits from low fuel prices, though.
Tigerair management expressed that the company will likely reap more benefits from the low fuel price environment. However, Tigerair is also bracing for the volatile macroeconomic conditions to persist, on top of overcapacity in the region.
According to a report by OCBC, based on CAPA data, the total current fleet size of Southeast Asia-based low-cost carriers (LCCs) as of 1 January 2016 is 609 aircraft, with 1,137 more in the pipeline.
OCBC notes that while the region’s LCCs fleet growth rate has tapered to 13% in 2015 from 20% in 2013, the ongoing uncertainty over global economic growth is not helping to drum up demand at the same pace. Airline revenue will likely remain weak as yields continue to struggle with downward pressure.
Given this, OCBC expects Tigerair’s progressive decline in its fuel hedging price to help offset top-line weaknesses.
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