In face of loss, Tiger can find hope Down Under
The carrier is scaling up its operations with the opening of a second base in Australia despite reporting a net loss of S$104m for FY12.
Tiger Airways’ Sydney base will be open to business starting July 2012. The new base will allow it to ramp up service from the current 38 to 64 sectors per day by end-2012.
In a statement, DBS Research said the start of the airline’s new operations should remove much of the uncertainties regarding utilisation of Tiger’s current and incoming fleet.
Tiger Airways reported more than S$16m in net losses for 4Q12 on the back of to a limited flying schedule and a lower-than-expected recovery in load factors.
Both Tiger Singapore and Tiger Australia contributed to net losses in 4Q, owing to continued underutilisation of their fleet.
DBS said the carrier’s poor showing was “expected,” as the group carried 8% lower passengers in FY12, owing to the suspension of Australian operations for six weeks last year and the limited operating schedule in Australia after the resumption of operations.
According to the analyst, the 34% y-o-y increase in jet fuel price was the other key factor in the loss, as it pushed up Tiger’s CASK to 6.80Scts from 6.05Scts a year earlier.
Non-fuel CASK was also up significantly, owing to higher staff costs and maintenance costs associated with getting the Australian operations back on track.
DBS Research said it expects non-fuel unit operating costs to be lower on a bigger base of operations and jet fuel prices could also moderate from the high levels seen in recent past.
With the commencement of services at Tiger Airway’s Sydney base, the analyst sees Tiger Singapore expanding capacity by only 7% in 1H-FY13, which will give it time to digest the significant capacity added in FY12 and to improve loads.
It added that the bigger scale of operations should allow Tiger to narrow losses over the next few quarters and potentially turn around by 3Q-FY13, a seasonally-high period for loads and yields.
The carrier, it concluded, might be near breakeven for FY13 and register S$67m net profits in FY14.