Tiger Airways is one of the low cost carriers that has a strong presence in Singapore and Australia. It plans to increase its presence
across various countries in Asia Pacific region through joint ventures. It
intends to increase its fleet size from 33 to 68 by financial year 2015. But
for Tiger Airways to execute its plans of expansion it would really need to pull
up its socks as its financial position has deteriorated over the years like all
the other airlines in the industry. Over the past few years the company has
gone from profit of $39.9M to a loss of $104.3M.
One positive for it was increase of sales from 107.22% to
124.96%. Company is also earning negative returns on its assets which is a big
disappointment, However Company has taken some positive steps in order to
revive its position in market and capture the market share which it has lost to
its competitors. Tiger Airways has decided that it would buy 40% stake in SEAIR
valued at US$7mn along with liabilities which would be determined through due
diligent process. Company also intends to buy 3 new A320 by joining hands with
another airline through joint venture route by FY13E.
This is a positive development for Tiger Airways considering
that there was a demand supply mismatch in Australia & Singapore which
would be reduced after its flights would be deployed in other joint ventures
which would mean that Tiger Airways would have its presence in countries like
Philippines and Indonesia. Lot of governments is not open to allow foreign
airlines to operate in their countries independently instead they encourage
companies for joint ventures. Hence, it would be important for Tiger Airways to
join hands with local companies of other countries to increase its presence and
provide high quality service.
Stock of Tiger Airways didn’t react to the news of purchase
of stake in SEAIR as company had announced the same earlier but was not able to
deliver to its promise. There is lot of rage among customers with regard to the
quality of the service which is provided by Tiger Airways. Hence, that would be
something which it would need to improve in coming days in order to be a leading
player in this segment. Aviation is a sector which is always consumer driven
and it would be important for Tiger Airways to take the feedback from customers
in positive way and work towards improving its standards.
Overall the developments are positive for the company but
lot depends on its ability to execute its plans, Australia is one of the
countries where in skeptics had written off the airline but Tiger Airways with
its grit and determination has turned out by improving its service and looking
forward to expand its horizon beyond Australia and Singapore. Its CEO Davis
interview had said that they are looking for profitable business models and
they aren’t in hurry to expand their presence in every part of the world. Hence, analyst's view on the stock is neutral with a target price of S$0.52
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