Another bleeding fiscal year for Tiger Airways: PhillipCapital

Airlines still likely in the red for FY13E despite Tiger Australia's turnaround.

"We reversed our profit estimate for FY13E and expect Tiger Airways to be in the red for another year," said the brokerage firm, adding that there will be "further erosion of its equity base."

PhillipCapital also foresees costs rising for the budget airlines following its move to Changi Airport Terminal 2 after the budget terminal closed down.

"While there are positives from improved connectivity with links to the rail network and opportunities for collaboration with other airlines, we also expect higher operating cost for the company with the shift," it said.

"We estimate that airport related charges would increase the airline’s operating cost by c.S$11/pax (Aerobridge fees: S$165/plane vs no Aerobridge; Passenger Charge: S$28/pax vs S$18/pax). Taken in isolation, S$11/pax may appear insignificant. However, it actually represents c.8% of the average fares paid by passengers travelling on Tiger Airways Singapore," it added.

"While we expect Tiger Airways to pass on these higher costs to its passengers, the price sensitive nature of the budget market could lead to lower demand in respond to higher fares," it said further.

Tiger Australia seems also set for higher operating expenses.

"Beginning July 2012, the carbon tax regime had been implemented in Australia. While Tiger Airways Australia had not quantified the exact impact, we can gauge the expected increase in cost of the carbon tax regime from commentaries by its peers in Australia," said PhillipCapital.

"According to a report by the International Business Times, Virgin Australia would collect A$1.50-A$6.00, Jetstar would collect A$10 and Qantas would collect A$3-A$6 for carbon surcharges onboard domestic flights in Australia. We believe that Tiger Airways Australia would likely incur higher operating expense of similar magnitude," it said.

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