Tiger Airways' return to profit hinges on two-fold action
It will need to save its Singapore operations from the red and ramp up utilization in its promising new Australia base, says PhillipCapital.
But fuel price conditions are proving to be a problem, not only for Tiger Airways but for the rest of the airlines industry, and will be one of the key barriers for any push to profitability.
Here's more from PhillipCapital:
While the losses were larger than expected, we think that a renewed focus on profitability at Tiger Airways Singapore (TAS) and improvement to fleet utilization for Tiger Airwarys Australia (TAA) could potentially bring Tiger Airways back to profits in FY13E. However, we think that the outlook remains hazy as the airline industry continues to struggle with high fuel prices, resulting in poor profitability across the industry. Successful start up of its base in Sydney would be the critical success factor in the near term, in our view.
Sector limits imposed on TAA is currently at 64sectors/day, similar to the levels of production prior to the grounding, only 6-7 aircrafts (out of 10) are being utilized due to capacity constraints at Melbourne airport. Fleet
utilization should improve after its base in Sydney is started in July. Capacity growth at Tiger Airways Singapore (TAS) would be moderated in FY13E with the number of aircrafts expected to be maintained at 19.
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