It doesn’t add up: Tiger cutting growth in Australia

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Tiger Airways Australia’s decision to “shelve” planned growth this year for its Australian division and defer future aircraft from Australia after incurring a weather-related loss raises serious questions about the carrier’s operation and safety here.

Tiger’s Australian division incurred an annual loss to 31 March of SGD$7.1m (A$5.4m), up from last year’s S$0.6m. ”That was primarily due to the weather events that we saw in Australia from December through February. We anticipate the weather events in Australia will cost us around [S]$15m of profitability,” Tiger Airways group chief executive Tony Davis explained Thursday night when announcing the group’s total pre-tax profit nearly tripled to S$57m from last year’s S$19.9m. ”Our profits in Australia are generally derided in the December, January peak season.”

As a result of the loss, Tiger will not bring its Australian division’s fleet from 9 to 11 as planned. The two aircraft meant for the region, including one that arrived in the country last month, will be deployed on intra-Asian routes, along with seven others, boosting the group’s total fleet size to 35.

Instead of growth, Davis says Tiger is “maintaining seat capacity in Australia flat on last year, so the planned increased in capacity will now not occur in Australia and the Australian business will focus its actives on profitably flying than achieving growth in this current year.”

But the two do not add up. If Davis’s statement is correct of the natural disasters costing Tiger S$15m of profitability, had the disasters not occurred Tiger would be in the black and should expect to do so again this year and thus could grow. (That’s provided Tiger assumes the natural disasters were a one-off series. If not and the airline can predict another natural disaster, it could surely make more money in insurance and aiding governments than in flying.)

Growth would be important as Virgin Australia relinquishes leisure market share in favour of the corporate market. Jetstar is already moving to take advantage that, planning for approximately 20% growth. When Qantas announced its low-cost subsidiary would lease 10 additional Airbus A320 aircraft, chief executive Alan Joyce remarked: “We see great opportunities for Jetstar, particularly in the domestic market as our competition changes their focus..It is an opportunity Jetstar is seizing.”

If Davis’s statement is not correct and Tiger is forecasting the same downturn Virgin Australia is, then Tiger is not being forthcoming and, possibly worse, hiding behind a natural disaster.

Another possibility is the carrier uncertainty over the outcome of its show cause notice with the Civil Aviation Safety Authority. Until CASA reaches a decision Tiger is unable to grow its operation here, according to sources familiar with the matter.

Although Tiger Airways may be derided with some media outlets electing not to report on the carrier, it is a major transport provider in Australia and requires scrutiny of no lesser level than that afforded to established carriers.


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