Tiger Airways’ future hangs in the balance

Australia’s Civil Aviation Safety Authority (CASA) has lifted its ban on budget carrier Tiger Airways, whose entire fleet was grounded over safety concerns since Jul 2. This was the first time an airline’s entire fleet was grounded. Tiger will resume flights on Aug 12, but up to only 18 flights a day.

Will Tiger regain its erstwhile traffic?

Safety concerns are a big deal in aviation. No doubt Tiger will have much image repair work on its plate. This is recognized by its new Australian chief Tony Davis, who said: “There is a confidence issue we need to build on, but it is a business model that has been proven around the world.” Given that most people’s memory is short-lived and the current state of an extremely price-sensitive market, Tiger may yet again have a new lease of life.

But the more interesting bit of crystal-gazing lies in how the recent development may be changing the game for Tiger and shifting its course.

For one, partial owner Singapore Airlines (SIA) is showing a more visible interest in the budget carrier. It has appointed former SilkAir chief Chin Yau Sing as Tiger’s Ag chief executive, replacing Mr Davis, who has since moved on to head the Australian operations. If Tiger is veering off course, SIA seems determined to set it right.

SIA has denied earlier rumour that it was increasing its stake (currently 32.9 per cent) in Tiger. The possibility is not ruled out.

Next, how will the competition pan out between Tiger and SIA’s new subsidiary budget carrier that is expected to commence operations by next year. While Tiger will continue to provide SIA with important feed within Australia, its expansion outside the continent is likely to be curtailed. Already it is not faring as well as rivals such as AirAsia in forging joint ventures in the lucrative Asian market, the Thai flip-flop being a case in point. Given a choice, SIA most likely prefers to pitch the new subsidiary in the game.

Mr Chin told The Sydney Morning Herald in a recent report (before the ban was lifted) that Tiger may be trimming Australian operations. He said: “We lost money in Australia in the last financial year and said then that we would review the network and focus on our more profitable routes.” The Australian suspension of its fleet seemed an opportune time to clean the slate. With CASA’s approval to resume a limited number of flights, it makes sense to operate only its most lucrative Sydney-Melbourne sector.

According to Mr Davis, the grounding has cost the budget carrier more than A$10 million.

The surge of new budget carriers in Asia has heightened the competition. SIA will note how neighbours Malaysia Airlines (MAS) and AirAsia have joined hands to rationalize their operations. In a share swap that saw AirAsia chief Tony Fernandes acquiring a 20 per cent stake in MAS – apparently to rescue the national flag carrier from plunging further into the red – both parties pledged to review their networks so as to reduce costs and direct competition with each other. MAS will focus on the full-service premium product, and AirAsia (along with AirAsia X) the low cost business. Firefly, the budget subsidiary of MAS, will shift its focus to becoming a full-service regional carrier.

It is a matter of time when SIA too will reassess whether it has one too many on its plate. Clearly, Tiger’s future hangs in the balance.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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