Turbulent years ahead for Tiger Airways

PhillipCapital predicts even bigger losses in 2012 and a slower rebound in 2013.

The budget carrier suffers from poor fleet utilization and an increasing inability to pass on rising costs to passengers, notes the brokerage firm, which led to its dismal peak season performance.

Tiger Airways posted a disappointing S$17.4 million loss last quarter, and these longstanding issues will likely result in a protracted income quagmire.

Here's more from PhilipCapital:

Tiger Airways reported losses of S$17.4mn for the quarter, mainly due to the under utilization of its fleet in Australia. Tiger Airways Australia (TAA) reported losses of S$8.6mn on sales on S$40.3mn, while Tiger Airways Singapore (TAS) reported losses of S$4.8mn on sales on S$128.5mn

Operating losses from Singapore came as a surprise to us. The quarter ending in December is the traditional peak season for operations out of Singapore. However, load factors declined on year, due to a 71% increase in capacity for TAS. Higher fuel prices were also not passed through to its customers, which resulted in the operating loss of S$4.8mn.

Losses from TAA are within expectations due to under utilization of its fleet. However, TAS disappointed with losses in the peak travel season. Lower load factor for TAS at lower yields is a cause for concern, as it indicates that capacity out of Singapore could be growing too quickly. From this set of results, it is evident that Tiger Airways had been struggling to pass on higher operating costs, largely due to high fuel prices, to consumers. Faced with overcapacity with low fleet utilization, we expect bigger losses in FY12E and lower profits in FY13E.