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Tiger’s Failure To Fly A Brilliant Short Play
Tradeable, Tradeable Ideas | 31 July 2014
By: Raymond Leung
Articles (142) Profile
  1. Tiger Air sinked further into red ink as revenue dipped. Losses hit $65.2 million despite lower expenses.
  2. Tiger Air’s operations also reported a loss of $19.8 million. This was primarily due to oversupply of capacity in the region.
  3. Losses in Australia will continue to haunt Tiger Air. Little respite expected from the tough operating environment.

Tiger Airways Holdings (TigerAir) faces further woes as the group continued to be in the red the previous quarter. Revenue for the group fell by 28.4 percent year-on-year (YoY) from $236.2 million to $169 million.

According to management, this was mainly attributed to the cessation of TigerAir Australia as a subsidiary of the group.

Net losses for TigerAir increased by 99 percent despite the lower expenses to $65.2 million from last year’s $32.8 million. The sharp increment in losses was due to the disposal of its Indonesian associate company, PT Mandala. PT Manadala incurred an operating loss of $35.3 million and a shutdown cost of $14.6 million.

TigerAir’s Singapore operation also reported a loss of $19.8 million as the industry faces strong headwinds due to the oversupply of capacity in the region. Further losses are foreseeable as the share of its losses in TigerAir Australia was not reflected this quarter.

In view of the tough operating environment, TigerAir cancelled nine orders of A320 last year. Meanwhile, the group is currently actively looking to place out its surplus planes which may bring some potential upside.

PT Mandala returned four aircraft to TigerAir which adds to the eight other aircraft that are being grounded.

Tiger's overseas woes have been further compounded by its Indonesian failure

The operating environment of TigerAir is not expected to improve in the foreseeable future as the aerospace industry is facing strong headwinds. There is also a huge oversupply of capacity in the region while losses in Australia deepen for TigerAir.

Unanimously, three analysts from different research houses gave a “Sell” call with an average potential downside of 35.7 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.


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