The worst may be over for Tiger Airways

Tiger's profit slips again in Q3 with both cubs in Singapore and Australia in the red but analysts see silver lining.

Tiger reported 3QFY12 net loss of S$17.4m vs a profit of S$22.5m in the previous corresponding period. 9MFY12 net losses have ballooned to S$87.9m (9MFY11: S$38.5m profit), but revenue held steady, unchanged at S$457.1m. Operating costs has grown 24% YoY, largely driven by a 37% rise in fuel costs. Yields fell by -6.9% to 7.07 Scts.

DMG Research however notes that losses have narrowed from previous quarters at –S$49.9m in 2QFY12 and –S$20.6m in 1QFY12. Also it says that while both cubs in Singapore and Australia reported operating losses, Tiger on the positive side successfully subscribed for a 33% stake in Indonesian Mandala Airlines and plans to deploy aircrafts there in 4QFY12. Operations set to commence in 1QFY13.

“It appears the worst may be over for the Airline as it hit rock bottom in 2QFY12. Future newsflow should improve and provide as a positive catalyst to the stock price,” said Melissa Yeap, analyst at DMG.

Here’s more from DMG:

Tiger Australia reported an operating loss of S$8.6m for 3QFY12 vs a profit of S$5.9m in the previous corresponding period. Tiger Singapore reported a similar loss of S$4.8m vs S$19.4m in the previous corresponding period. Australia was affected by its restricted operations, currently running at 32 sectors/day vs 60 pre-grounding. Management however is hopeful that things will revert back to pre-grounding levels by mid-year. In Singapore, losses were due to over-capacity and higher jet fuel prices which inflated costs eating into its earnings.

… but progress in Indonesia. Whilst 9MFY12 losses of S$87.9m seem overwhelming at first glance, Tiger appears to be finally making some headway in its overseas expansion. It has successfully subscribed for a 33% stake in Indonesian Mandala Airlines which is currently in the process of re-activating its Air Operator’s Certificate (AOC). Tiger plans to deploy aircraft to Indonesia in 4QFY12 and operations are set to commence in 1QFY13. This news at least alleviates one of our major concerns of over-capacity.