Crash and burn: Tigerair Singapore’s operating loss hits $16.4m in Q2

Expect further losses with no significant turnaround in sight.

It has been a turbulent quarter for Tigerair. Apart from the closure of Tigerair Mandala, Tigerair Singapore recorded an operating loss of $16.4m in 1QFY15 (April-June 2014), compared to a core operating loss of S$6.2m in 1QFY14.

According to DBS, profitability in near term seems far-fetched with Tigerair having to sacrifice yields to maintain stable load factors. This is due to an overcrowded air traffic region where meaningful capacity rationalizations are yet to manifest.

“Although closure of the Indonesian associate is in line with the turnaround strategy, it is another disappointing end to the regional ambitions with minimal exposure to one of the biggest aviation markets in the region. However, Tigerair will now be able to concentrate on improving its Singapore operations by working on shrinking its cost base while leveraging on alliances with Scoot, SpiceJet and Cebu to increase its customer base,” noted the report.

Here’s more from DBS:

Losses from Indonesian associate amounted to S$35.3m whilst the losses from Australian associate were not recorded since the investment had already been fully written down.

Winding down costs of Indonesian operations, related to employee layoffs amounted to S$14.6m, while further provisions related to possible grounding of the four aircraft returned from Indonesia are likely to materialize in coming quarters. There is an opportunity to transfer some of the aircrafts to Tigerair Taiwan, though.

No respite from losses in the near term. We expect the Singapore operations to remain in the red in the near term as yields are unlikely to improve significantly, given slowing passenger growth in Singapore Changi Airport.