Floundering Tiger to post $22M loss

[Saab34]

Well those finance experts were wrong, it was a $50 million loss. No wonder they need an IPO, they are financially dead.

Tiger battles for a bite

BUDGET carrier Tiger Airways plunged to a $50.1 million loss last year as the Singapore-listed airlines group struggled to take a share of the Australian domestic market. The costs of operating in Australian skies also stripped $S20 million ($15.8 million) from the parent company's reserves, leaving the business with just $S13.2 million in available cash.
The group loss for Tiger Singapore and its cub Tiger Airlines Australia for 2008-09 amounted to $S50.8 million, reversing the previous year's $S9 million profit.
The annual accounts of Tiger Aviation Singapore, filed nine months late, show the company owed more than it owned, with liabilities at the end of March this year exceeding assets by $S109 million.
Group assets, held by both the Singapore and Australian businesses, were valued at $S187 million contrasted by liabilities of $S296 million.

Tiger Airways Singapore declared an operating profit of $S12.2 million, its second consecutive profit and a $3 million improvement on the previous year.
Group president Tony Davis said the Australian business was "negatively impacted by the adverse impact of record oil prices and foreign exchange volatility".
During the period, Tiger launched in Melbourne with three aircraft, opened a second base in Adelaide and incurred a $17 million loss on fuel hedging as jet kerosene prices soared to more than $US170 a barrel.
Revenue rose to $S384 million, an increase of $S74 million at a time when the business incurred a $S15 million rise in staff costs and a foreign exchange loss of $4 million.
Peter Harbison, a leading aviation commentator and head of the Centre for Asia Pacific Aviation in Sydney, said the carrier seemed committed to a long-term view.
Tiger Australia will switch from a holiday route operator to high yield routes. Having launched a Melbourne-Sydney service last July it will soon begin Melbourne-Brisbane flights.
It has also announced a Sydney-Gold Coast service.

 

[serfty]

So the loss for the Oz arm was ~AUD15¾Million.

 

[UP4014]

How could they loose on fuel hedging complaining the price went up. Unless of course they didn't hedge and wished they had, thus loosing $17M because of a lack of operational acumen.

I thought with hedging you promised to pay a certain price for fuel in the furture, so if in fact the price does go up you already have you rate locked in.

So you would only pay more than the "pump price" if it went down, but the upside to that is you know in advance what you fuel price is going to be making forward planning easier.

Matt

 

[drewbles]

How could they loose on fuel hedging complaining the price went up. Unless of course they didn't hedge and wished they had, thus loosing $17M because of a lack of operational acumen.

I thought with hedging you promised to pay a certain price for fuel in the furture, so if in fact the price does go up you already have you rate locked in.

So you would only pay more than the "pump price" if it went down, but the upside to that is you know in advance what you fuel price is going to be making forward planning easier.

Matt

My guess is they hedged at a rate say $150/barrel, and it's plummeted. They've bet the wrong way is my guess.

 

[codash1099]

So the loss for the Oz arm was ~AUD15¾Million.

My reading is that figure is the negative cash flow. That doesn't necessarily represent the actual loss incurred.

 

[UP4014]

"BUDGET carrier Tiger Airways plunged to a $50.1 million loss last year as the Singapore-listed airlines group struggled to take a share of the Australian domestic market."


Struggled to take a share, they should just look at the product they have if they wonder why they are missing out.

 

[crazydave98]

So the loss for the Oz arm was ~AUD15¾Million.

No. That figure is simply the difference between the cash in the bank the group held in March 2008 to March 2009. The actual loss is quoted at $50.1m Having only $13m in the bank is cutting it very fine indeed - wouldn't take much to clean that out. Imagine if a credit card company got nervous about Tiger's financial position and witheld payments until the sectors paid for were actually flown? That's what tipped Frontier into bankruptcy.

Tiger is actually run very much like a Ponzi scheme, funded by forward bookings rather than new investments. Essentially the cash from tomorrow's forward bookings is used to pay for operating today's flights, and as long as the volume of forward bookings is growing because new aircraft are being added to the fleet (financed by sale and leaseback) all the balls stay in the air. It is only the backing of heavyweight parents which keeps the confidence game going. The whole thing only stabilises when the airline starts actually generating profits at which time it becomes self-sustaining - but Tiger is a long way from that happening. In the meantime they have to grow or the shareholders have to tip in money. Hence also the testing of the waters via the media for an IPO.

So serfty, back to your observation - the lesson is not to confuse change in cash balance with profit, particularly for a very rapidly growing company. It might interest some people to note that in Tiger's financial statements, it has current assets of $39m (including the $13m cash) and current liabilities of $266m including "Sales in advance of carriage" of $56m which alone is much greater than current assets. Also of particular concerns is that the "Sales in advance of carriage" balance has dropped from $63m last year to the $56m this year despite all the extra aircraft in service, so they are obviously having problems with sales.

cheers

CrazyDave98

 

[codash1099]

No. That figure is simply the difference between the cash in the bank the group held in March 2008 to March 2009. The actual loss is quoted at $50.1m Having only $13m in the bank is cutting it very fine indeed - wouldn't take much to clean that out. Imagine if a credit card company got nervous about Tiger's financial position and witheld payments until the sectors paid for were actually flown? That's what tipped Frontier into bankruptcy.

Tiger is actually run very much like a Ponzi scheme, funded by forward bookings rather than new investments. Essentially the cash from tomorrow's forward bookings is used to pay for operating today's flights, and as long as the volume of forward bookings is growing because new aircraft are being added to the fleet (financed by sale and leaseback) all the balls stay in the air. It is only the backing of heavyweight parents which keeps the confidence game going. The whole thing only stabilises when the airline starts actually generating profits at which time it becomes self-sustaining - but Tiger is a long way from that happening. In the meantime they have to grow or the shareholders have to tip in money. Hence also the testing of the waters via the media for an IPO.

So serfty, back to your observation - the lesson is not to confuse change in cash balance with profit, particularly for a very rapidly growing company. It might interest some people to note that in Tiger's financial statements, it has current assets of $39m (including the $13m cash) and current liabilities of $266m including "Sales in advance of carriage" of $56m which alone is much greater than current assets. Also of particular concerns is that the "Sales in advance of carriage" balance has dropped from $63m last year to the $56m this year despite all the extra aircraft in service, so they are obviously having problems with sales.

cheers

CrazyDave98

That's what I said, but with much greater detail :mrgreen:

 

[JohnK]

They will because the Singapore govt has very deep pockets. They don't care, its a strategic play to hurt QF Group in their homeland and has also crunched DJ's share in the process as well.

Has Tiger Australia really taken any siginificant share of the market from QF and/or DJ or is it more a case of enticing passengers who hardly ever fly or have never flown before based on affordability of arifares?

 

[ejb]

Has Tiger Australia really taken any siginificant share of the market from QF and/or DJ or is it more a case of enticing passengers who hardly ever fly or have never flown before based on affordability of arifares?

John,

I also hold the view that Tiger has added to the number of people flying rather than taken market share from QF/DJ.

There could be a few people of course but I think a lot of people flying Tiger are flying instead of driving or only flying because Tiger is cheap.

Very few people given the choice would move from QF/DJ to Tiger as the service is so far below what they would have become accustomed to.

ejb

 

[straitman]

Has Tiger Australia really taken any siginificant share of the market from QF and/or DJ or is it more a case of enticing passengers who hardly ever fly or have never flown before based on affordability of arifares?

+1 for me also.

 

[Dee Thom]

It looks like Jetstar, and AirAsia are about to announce an operational joint venture that could save both airlines 100's of $mill through procurements, ground handling, parts etc., together they have over 110 320's, 18 737's, and increasing with 320, and 321's arriving on a regular basis. The combined buying power is awesome.
If it comes to fruition, it will be a huge blow to Tiger in Singapore and Aus.............

Cheers Dee

 

[Saab34]

The possible effect on Tiger AU for the proposed AirAsia/Jetstar Asia relationship will be minimal. The effect on the Singas operation will be significant, but this is obviously 3K looking for ways to bring down their cost base, which is 10x the amount of Tiger's. TR does well on longer routes, where as 3K has failed in the past, and this is where their no cost base approach takes them further. Looking at SIN-PER where Tiger has a average loading of 95%, the effect of Jetstar on this route has been minimal since they came in.

Has Tiger Australia really taken any siginificant share of the market from QF and/or DJ

Yes and no.
From Adelaide, they have made significant inroads. Routes like ADL-CBR on the days Virgin fly you will see the differences, TT would pull 110/120 while DJ would send the E190 with 30/40 pax. They made DJ drop the ADL-HBA route and they have downgraded their ADL-OOL run to a Embraer since Tiger came along.
In Melbourne it seems they are fighting it out with JQ for the lowest price to secure pax, but Tiger does have good frequencies on some routes coming into 2010.

Effects on QF? From ports like Alice Springs mabye.

 

[pauly7]

Yes and no.
From Adelaide, they have made significant inroads. Routes like ADL-CBR on the days Virgin fly you will see the differences, TT would pull 110/120 while DJ would send the E190 with 30/40 pax. They made DJ drop the ADL-HBA route and they have downgraded their ADL-OOL run to a Embraer since Tiger came along.
In Melbourne it seems they are fighting it out with JQ for the lowest price to secure pax, but Tiger does have good frequencies on some routes coming into 2010.

Effects on QF? From ports like Alice Springs mabye.

QF group has successfully maintained 65% domestic market share through all Tigers slash and burn pricing. Of course the GFC, discounting and yields it would make it difficult to pull apart Tigers impact on that.

Probably DJ is feeling the pinch more.

 

[straitman]

The effect on the Singas operation will be significant, but this is obviously 3K looking for ways to bring down their cost base, which is 10x the amount of Tiger's.

Where do you get this 10x figure from as it seems astronomical :?:

 

[docjames]

Where do you get this 10x figure from as it seems astronomical :?:

+1 as i'm not sure that is an accurate claim!