Tigerair records heavy losses

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This was published 10 years ago

Tigerair records heavy losses

By Matt O'Sullivan

Tigerair Australia racked up a large loss in the second quarter as the ultra-budget airline faced stiff competition from Jetstar in a domestic market with excess seats.

Now under the influence of Virgin Australia, Tigerair has posted a $S18.25 million ($15.35 million) loss for three months to September 30, compared with a $S20 million loss in the same period last year.

Facing stiff competition: Tigerair.

Facing stiff competition: Tigerair.Credit: Craig Abraham

The loss highlights the pressure Tigerair will put on Virgin's finances as it attempts to turn around the budget airline in the midst of excess capacity and weak demand from cost-conscious travellers.

In filings to the Singapore stock exchange last night, Tigerair Singapore revealed that its share of the Australian airline's losses amounted to $S7.3 million for the second quarter.

It has a 40 per cent stake while the remainder is now owned by Virgin.

Virgin has not made a statement but the figures from Singapore imply that its share of the losses amounted to $S10.95 million in the second quarter.

The detail on Tigerair's mounting losses come a week after Jetstar's parent, Qantas, warned that yields – or return on fares – across the airline group will fall by up to 3 per cent in the first half of this financial year.

The market interpreted that forecast as an effective downgrade, which put Qantas on track for a net loss of $136 million in 2013-14.

Qantas boss Alan Joyce has been steadfast in maintaining the group's 65 per cent share of the domestic market. It means Qantas or Jetstar will put on two extra flights every time Virgin or Tiger add one service.

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Jetstar has about 22 per cent of the domestic market, which dwarfs Tiger's share of about 4 per cent.

Following Virgin's acquisition of a controlling stake, Tigerair has begun to increase its focus from routes dominated by business travel such as Sydney-Melbourne to those serving leisure destinations.

The airline has launched several new routes in recent months including Melbourne-Coffs Harbour and Melbourne-Sydney-Alice Springs. It will also expand its presence on transcontinental routes in the lead-up to Christmas when it begins flights between Sydney and Perth.

Tigerair and Virgin have approval from the competition regulator to coordinate flights in the domestic market.

Tigerair is due to take delivery of another single-aisle A320 aircraft later this year, which will boost its fleet to 12 planes.

The airline changed its name from Tiger Airways to Tigerair several months ago and ditched the ''leaping tiger'' from its logo, in an effort to resurrect its tarnished brand.

But the latest losses show that Tigerair's management team faces a challenge in stemming the flow of red ink. The airline has now chalked up losses of more than $255 million since launching operations in Australia in 2007.

Tigerair's long-term growth plans entail a doubling of its size by 2018, which will prompt a strong response from Jetstar.

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