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Tiger Airways Holdings Limited - Selling SEAir - is Indonesian cub next?

17/1/2014 – Tiger Airways, 40% owned by Singapore Airlines, is selling its 40% stake in Tigerair Philippines to Cebu Air for US$7 mln or S$8.9 mln.

Cebu Air will also buy the remaining 60% from existing local shareholders.

Tiger Airways will report a loss of S$13.5 mln from the sale.

This is derived by deducting the sale price and translation gain of S$2 mln from S$24.4 mln, required to settle Tigerair Philippines' liabilities, forward sales and other transaction costs.

But it is forming a strategic alliance with Cebu to collaborate on international and domestic routes from the Philippines.

This is part of Tiger Airways' asset light alliance strategy to accelerate growth without stretching its balance sheet.

OCBC Research has maintained its HOLD rating with a target price of S$0.55.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question
Question

1. Is Indonesian "cub" next?

Tiger Airways had invested US$2.5 mln to buy 40% of Tigerair Philippines in August 2012.

Granted, the associate has been loss making since then.

It reported a loss of S$19 mln in FY13, S$6 mln in Q1 FY14, S$9 mln in Q2 FY14.

And a loss of S$13.5 mln will be booked in near future.

But only 18 months in and it was still in the early start-up phase without significant market share.

Did Tiger Airways see itself as having no choice?

In which case, is Tigerair Indonesia next?

Question
Question

2. Does it believe that it is now relieved from financial stress?

…and can move forward profitably?

Question
Question

3. What are the actual benefits of such marketing partnerships?

Tiger Airways and Cebu Pacific will collaborate commercially and operationally on international and domestic air routes from the Philippines, thereby creating the biggest network of flights to the region, they say.

The alliance will enable both parties to leverage their respective strengths and harness synergies to enhance their network coverage, flight frequencies and customer service, and jointly market their routes using interline arrangement.

Tigerair and Cebu Pacific websites will be used as sales and distribution platforms to market all routes operated by both airlines.

(Total number of questions in the full story: 8)

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

Sofar, we have not had a reply (which is why you are seeing this message).


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