Tigerair pulls the plug on struggling Mandala

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Tigerair Mandala will cease operations on 1 July, as its Singapore parent failed to find suitors for the struggling unit.

“The Board of Directors of PT Mandala Airlines announced this evening that its airline (operating under the brand name of Tigerair Mandala) will cease operations from 1 July 2014,” says parent Tigerair in a stock exchange statement.

Tigerair owns 35.8% of Tigerair Mandala through its Roar Aviation unit, with the other key shareholders being Saratoga Group and PT Cardig International. Although the trio has “vigorously explored various options in recent months”, they came to the conclusion that the carrier would “not be able to sustain its operations.”

AirAsia has stated that it will not be involved in Tigerair Mandala, and Garuda’s Citilink unit also passed up the opportunity to invest in the company.

“Mandala’s financial results reflect the challenges that it is facing in the difficult operating environment,” says Tigerair chief executive Lee Lik Hsin.

“The partners in Mandala have jointly come to the conclusion to cease funding the airline’s operations. Nevertheless, Indonesia remains an important market for us, and we will continue to maintain an active presence through Tigerair Singapore.”

The closure of the Indonesian unit is the first major strategic move for Lee, who became Tigerair’s chief executive in May. A veteran of Tigerair shareholder Singapore Airlines (SIA), Lee replaced Koay Peng Yen, who led the carrier for less than two years.

“The decision to pull out of Mandala will enable Tigerair Group to focus on its turnaround strategy, which includes fleet consolidation, strategic alliances, and asset-light growth model.”

In early May, Tigerair reported a net loss of S$223 million ($178 million) for the year ended 31 March, compared with a net loss of S$45.4 million a year earlier. SIA paid S$49 million last December for an additional 7.3% stake in Tigerair's parent company, bringing its total stake in the airline to 40%.

Flightglobal’s Ascend Online database shows that Tigerair Mandala operates nine Airbus A320 aircraft powered by IAE V2500 engines. Seven aircraft are owned by Pembroke Aircraft Leasing, and two by GECAS.