Singapore Changi Airport

Tiger faces challenging year as it looks to recover following losses in Australia and Singapore

Tiger Airways has reported a loss of SGD104 million (USD82 million) for its fiscal year ending 31-Mar-2012, a rare negative result for a leading Asian LCC, which generally continues to profit from the huge growth opportunities in the budget end of Asia’s dynamic market. But Tiger is confident the launch of new joint ventures in Indonesia and the Philippines will allow the group to absorb the excess capacity which plagued Tiger in FY2011/12, significantly increasing its ex-fuel unit costs as its fleet became underutilised.

With the return of higher aircraft utilisation and lower unit costs, coupled with more rationale capacity, Tiger’s typically profitable Singapore operation could return to the black later this year. But turning around the Australia operation, which was already unprofitable prior to the six-week grounding by Australian regulators last July and August, could be more challenging. Equally daunting is the task of turning its newly launched joint venture in Indonesia and its planned joint venture in the Philippines, which is now expected to launch in the quarter ending 30-Sep-2012 (2QFY2012/13), into profitable investments.

Outlook for Asia's full-service sector dims as Singapore Airlines reports rare quarterly loss

The outlook for the normally buoyant Asian market has further dimmed following a rare quarterly loss for Singapore Airlines (SIA). The SIA Group’s first net loss since the global economic crisis of 2008 could be seen partially as an indication of its weakening market position. But in reality it is probably more indicative of the broader challengers facing Asia’s full-service airline sector.

SIA has reported for the three months ending 31-Mar-2011 (4QFY2012) a group operating loss of SGD5 million (USD4 million) compared to an operating profit of SGD166 million (USD132 million) for the same period last year. The group’s net loss for 4QFY2012 came in at SGD38 million (USD30 million), compared to a profit of SGD171 million (USD136 million) the previous year. SIA was widely expected to report a decline in profits for the sixth consecutive quarter, but the small loss – the first since 2QFY2010 – came as an unpleasant surprise.

Jetstar Japan receives AOC and plans for 3-Jul-2012 launch as Narita to build new low-cost terminal

Jetstar Japan, a low cost airline joint venture between Qantas subsidiary Jetstar and Japan Airlines, received its Air Operator’s Certificate on 06-Apr-2012 from Japan’s regulatory authority the Ministry of Land, Infrastructure and Transport (MLIT). The AOC will ensure Jetstar can achieve its recently announced launch of 03-Jul-2012, significantly ahead of the Dec-2012 launch date given when the carrier was announced last year. Next Jetstar Japan will commence proving flights and start ticket sales.

Jetstar Japan is one of three new LCCs to commence operating this year in Japan. All Nippon Airways’ LCC subsidiary, Peach, commenced operations on 01-Mar-2012 between Osaka Kansai and Sapporo New Chitose Airport. ANA also has another JV subsidiary, AirAsia Japan, due to commence operating in Aug-2012.

Meanwhile Narita Airport has announced it will build a dedicated LCC terminal, presumably to offer a more attractive proposition to the new industry. Although the airport previously discussed a LCC terminal, it offered no firm commitments or details. The new LCC terminal is expected to open in 2015 with other facilities available in the interim for both domestic and international flights.

Tiger-backed Mandala resumes operations with focus on Indonesia’s largest routes

Indonesia’s Mandala Airlines has resumed operations and emerged from bankruptcy as a new affiliate of Asian LCC group Tiger Airways. Mandala’s first flight in 15 months operates today (05-Apr-2012) on one of Indonesia’s largest domestic routes, Jakarta-Medan. But the new Mandala, which only operated domestic services before its Jan-2011 grounding, will focus primarily on international routes starting with Medan-Singapore and Jakarta-Kuala Lumpur.

Mandala last week announced Jakarta-Medan and Jakarta-Kuala Lumpur as its first two routes as a Tiger partner carrier, with flights commencing on 05-Apr-2012 and 04-May-2012, respectively. But Tiger’s booking engine indicates that Mandala will start operating international flights earlier - on 20-Apr-2012 with one daily frequency on the Medan-Singapore route. More routes, primarily international but also some domestic, are expected to be added over the next few months as Mandala rapidly spools up its fleet of Tiger-sourced Airbus A320s.

Singapore Changi’s decision to close budget terminal could backfire as need for third runway grows

Singapore Changi Airport has taken the unusual decision to demolish its relatively new low-cost carrier terminal and build a larger hybrid terminal in its place. The closure of Changi’s Budget Terminal in Sep-2012 will result in the airport’s total handling capability shrinking by 10% during what could prove to be a challenging four-year period before the new hybrid Terminal 4 opens. Singapore also faces a pressing need to decide on the opening of Changi’s third runway, which is now only available to military aircraft, if it wants to stay ahead of the growth curve. Growing LCC operations have seen aircraft movements grow higher than passenger numbers.

A third runway and even a fifth terminal will eventually be needed for Singapore to maintain its status as a leading hub. Singapore and Changi have always made the investments to ensure there is plenty of space for growth and first class facilities for passengers. But the highly profitable airport has come under scrutiny over the last year: first for its unusual decision to start charging a tax for transit passengers and now for its decision to close its Budget Terminal only six years after it opened.

How Qantas planned to make its Asian premium carrier viable

Qantas is due to give further details at its half-annual results this week on its objective to enter the intra-Asia premium market, which it first officially raised in Aug-2011. As Qantas continued to develop its strategy and released details, confusion still existed to the basic premise. With updates due this week, it is worthwhile to review the project and interim developments since the carrier was first announced.