Tiger Airways warns of continued losses at Mandala and Seair

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Tiger Airways warns that its Indonesian and Philippine associates will continue to be in the red for the rest of the financial year despite the growth potential of both markets.

The Singapore-headquartered low-cost carrier completed a deal for a 33% stake in Indonesian airline Mandala in January and increased its stake in Philippine carrier Seair to 40% from 32.5% in August.

Both airlines are expected to continue operating at a loss during this financial year, which ends on 31 March 2013, says Tiger. This announcement comes as the carrier reported that its fiscal second quarter losses narrowed to Singapore dollars (S$) 18.3 million ($15 million) from S$49.9 million a year before.

"The [Tiger] Group remains optimistic about the long-term growth potential of the Indonesian and Philippines air travel markets, and will continue to seek ways to derive greater synergies from these existing partnerships," adds Tiger.

Tiger says it has accounted for its share of Mandala's pre-operating loss of $1 million, which is the cost of its investment in the airline. It has still not recognised its share of Mandala's cumulative losses, which amount to S$9.2 million. It has also provided guarantees for three aircraft that Mandala has leased.

Mandala has a fleet of three aircraft and plans to begin operations on its fourth Airbus A320 on new domestic and international routes in December, says Tiger.

For this quarter ending 30 September, Tiger has recorded losses of S$3.8 million attributed to its investment in Seair. The company increased its stake in Seair for a consideration of $2.5 million, provided guarantees to lessors to cover obligations for three aircraft and made a commitment for a convertible loan to Seair of up to $10.5 million.

Seair operates a fleet of five aircraft and new routes will be progressively added to its network, says Tiger. The airline's network covers seven domestic services out of Manila's Ninoy Aquino International Airport, four international services and one domestic service out of the city's secondary airport at Clark.

Tiger's main operations are its Singapore-based low-cost carrier and its fully-owned subsidiary Tiger Airways Australia. The airline says that it has agreed to sell a 60% stake in Tiger Airways Australia to Virgin Australia.