Tiger Australia remains a major drag.
3Q13 revenue grew 47% y-o-y to S$248m led by Tiger Singapore (+35% to S$173m) and Tiger Australia (+80% to S$73m) while Tiger Singapore’s EBIT turned from a loss of S$5m to a gain of S$27m.
According to DBS, at Tiger Australia, intense domestic competition meant yields were under pressure and EBIT losses widened by 50% y-o-y to S$13m. The overall turnaround was driven by a 42% growth in RPK, 5.7ppt improvement in load factor to 84.6% and a 3.5% gain in yield.
Losses at SEAir a drag. Tiger also booked its share of losses at SEAir of S$8.3m for the quarter, which were higher than expected.
The group also registered a S$1.3m loss on disposal of aircraft.
Singapore to continue leading the streak of cubs. Tiger Airways should continue to see strong performances from its home base of Singapore. After posting its 3rd consecutive and strongest quarter of profits, we believe Tiger Singapore is on a firm footing in terms of profitability.
Meanwhile, Tiger Australia will continue to see yield pressure from intense competition but should also see improved performances as they regain customer confidence. A successful sale to Virgin Australia (60%) should also put this cub in a better position to compete Down Under.
Associates will take time to nurture. Newly established cubs Mandala and SEAir, with just 7 and 5 aircraft respectively, will take time to mature. These will need to grow their fleet to at least 10 aircraft before they reach the scale necessary to be profitable, which will take the next 2 years or so to achieve, in our view.
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