Tigerair's latest financial results show that while it will stem the blood loss from its Australian operations, its cubs in Indonesia and Philippines will continue to bleed for some time yet.
Overall, the Tigerair group recorded a loss after tax of Singapore dollars (S$)32.8 million ($25.9 million) for the three months ending 30 June 2013, compared to S$13.7 million for the same period last year.
That loss overshadowed a significant narrowing in operating losses, which came in at only S$6.2 million compared to S$11.8 million in the previous corresponding period.
Importantly, Tigerair Australia reduced its operating loss from S$21 million to S$17 million. As the group has now sold a 60% stake in Tigerair Australia to Virgin Australia, it will not have to account for this unit's results from the next quarter. Tigerair says that this will help it start posting quarterly operating profits.
Tigerair adds that during the quarter it suffered an extraordinary charge of S$26.6 million stemming from losses related to the reclassification of loans to regional associates.
Tigerair holds a 33% stake in Indonesian carrier Tigerair Mandala, and 40% in Tigerair Philippines, formerly known as Seair.
The airline group adds that these operations will remain in the red for some time.
"The Tigerair Group also expects losses from its associated airlines, Tigerair Mandala and Tigerair Philippines, as it continues to strengthen its operations and expand in Indonesia and the Philippines," the company says.
Part of the problem is the relative lack of scale between the operations, which is important for maintaining the low-cost base of the airlines. Flightglobal's Ascend Online Fleets database shows that Tigerair Philippines has only three Airbus A320s and two A319s in its fleet. Tigerair Mandala has nine A320s, and will receive three more by mid-2014.
Tigerair has given cryptic indication that the Philippines operations is not realising its true potential as a low-cost carrier. The airline says that it "continues to expand its route network and also tap on the Chinese market with charter opportunities", as well as expanding the number of flights to Singapore and Thailand.
Charters are not part of the standard low-cost carrier business model, and are likely an indication that Tigerair Philippines is struggling to gain the necessary slots, regulatory approvals and market access to expand significantly in the Philippines market.
Flightglobal's Flightmaps Analytics shows that Tigerair Philippines has the second smallest share of capacity in the domestic market with 5.7% of total ASMs. However as Philippines AirAsia is entering into an alliance with ZestAir, the two carriers will overtake Tigerair with 12.3% capacity share.
Philippines carriers by share of domestic ASMs
The story is not much better in Indonesia. Flightmaps shows that Tigerair Mandala has only 1.7% of domestic capacity in a market dominated by the likes of Lion Air and Garuda Indonesia.
Indoneisan carriers share of domestic ASMs
Nevertheless, the size of the Indonesian domestic market, especially as compared with the Philippines, will likely open up new opportunities for Tigerair Mandala. The airline has also benefited from the collapse earlier this year of Batavia Air, which was a large player in that market.
The Indonesian unit has also been busy adding new international services, predominantly to Singapore where it can connect passengers onto the other Tigerair carriers.
Analysts that Flightglobal Pro have spoken to have sounded a number of warnings about the two markets, noting that infrastructure constraints and distribution challenges will prevent the two affiliated carriers from establishing themselves as efficient, true low-cost carriers.
Given their weak market positions and lack of scale, it seems that Tigerair Philippines and Tigerair Mandala will continue to be problem children for their parent.
The question will then become one of how Tigerair's shareholders - especially Singapore Airlines - will tolerate the bleeding.