Tiger Airways Australia

Tiger Airways’ pan-Asian ambitions floundering with dire need for growth

With progress still to emerge on a series of pan-Asian joint-ventures, Tiger Airways is nearing a tipping point where it must decide if it can be a baby pan-Asian carrier to the more successful AirAsia and Jetstar, or if reality will constrain it to a limited and disconnected franchise network. The implications may make or break the airline group: stalled progress on joint ventures (JV) and a reduced network in Australia saw Tiger instead deploy capacity on its Singapore network. That proved too much, blowing out costs and causing the usually healthy operation to post a SGD12 million (USD9.3 million) loss for the quarter to 30-Sep-2011.

Expected poor performance in Australia as the carrier was impacted from a six-week imposed grounding saw the subsidiary post a SGD27.2 million (USD21 million) loss.

Qantas yields soar on Tiger's grounding

Domestic yields at the Qantas Group have soared in the first part of the financial year with the company recording a 9.4% yield increase year-on-year in Jul-2011, its second highest monthly growth in a decade. The period corresponds with the grounding of Tiger Airways Australia, which removed approximately 12,400 seats from the market daily and saw airfares significantly increase.

Yields – calculated across all of the Group's domestic operations – continued to show strong growth even after Tiger resumed services in Aug-2011, albeit with only 10% of its pre-grounding seats. Qantas domestic yields grew 5.8% year-on-year in Aug-2011, the 15th highest monthly growth in the 117 months Qantas has reported figures.

Bruce Buchanan, CEO of Qantas' Jetstar unit, has acknowledged the upward pressure. Domestic yields across all Australian mainline carriers can be expected to grow highly over the next few months as Qantas removes capacity due to union strikes, but will come at the expense of decreased revenue at Qantas. For Virgin Australia, yields will grow with revenue.

Australian air fares continue to climb post-Tiger grounding

The upward pressure on domestic Australian air fares, which started after low-cost operator Tiger Airways was grounded in Jul-2011, is showing no signs of relenting. Fare decreases are expected from the peak September period to the comparatively slower October, but the drop this year is lower than the corresponding drop in 2010, suggesting fares - which soared after Tiger's grounding - are not plateauing.

Fares in Oct-2011 dropped 11.3% from Sep-2011, a lower decrease than the previous year's drop of 15.6% from Sep-2010 to Oct-2010.

Although jet fuel has surged in the past year, and could explain an increase in ticket prices, Australian air fares were relatively flat until Tiger's grounding saw fares increase.

Tiger Australia settles in for medium-term with new director but growth restrictions and lower fares

Tiger Airways Australia is settling in for the medium-term with a re-launched network it has built up, which is now approximately one-third of its Jun-2011 pre-grounding size. The immediate future will see former Virgin Blue executive Andrew David take the reigns from Tony Davis, who is leaving the company.

Tiger is also lowering its lead-in fares to pre-grounding levels, but no headline fares of AUD15 inclusive or zero (plus taxes) have been offered yet, and may not be as long as Tiger faces no price undercutting and seeks to build network volume with requisite approval from the Civil Aviation Safety Authority (CASA). Its growth outlook is focused on Melbourne Tullamarine, with service resumption from Melbourne Avalon unlikely in the next year.

Ansett’s collapse set decade of positive change for aviation in Australia – and beyond

The 14-Sep-2001 collapse of Ansett Australia set the following decade for a series of rapid and momentous changes in Australian air transport, with effects felt globally. Few if any single airline collapses have had the widespread and lasting impact of Ansett, although ultimately the Australian market benefitted from Ansett’s exit, which permitted unstable start-up Virgin Blue to secure a position and significantly reduce average air fares. Other floundering carriers in the world could have had a larger exit impact than Ansett - were it not for last-minute government-backed bailouts that demonstrated not so much decreasing liberalisation as perceived increasing political importance of airlines to their countries in a globalised world. The post-Ansett evidence suggests these attitudes may be misplaced.

Tiger looks to catch-up after rights issue and departure of founding CEO Tony Davis

Tiger Airways is trying to move forward after surviving the most challenging chapter in its six-year history, capped off recently by a further shake-up in Tiger’s executive team, with founding CEO Tony Davis leaving the group, and a rights issue. Tiger's position going forward is significantly improved, but it still has several challenges to overcome if it has any chances of catching up with rival LCC groups AirAsia and Jetstar, which have successfully established pan-Asian footprints while similar efforts at Tiger have so far failed.