• 1QFY15 PATMI loss doubled YoY
• Remaining Singapore ops unpromising
• Expect more provisions

1QFY15 losses from operations and oneoff costs

Tiger Airways Holdings’ (TR) 1QFY15 revenue came in 7.7% below expectation at S$169.0m while higher-than-expected operating costs resulted in an operating loss of S$16.4m. On a YoY basis, 1QFY15 revenue and operating expenses declined 28.4% and 23.5% respectively due to the exclusion of Tigerair Australia, which ceased to be a subsidiary from 8 Jul-13. 1QFY15 PATMI loss almost doubled from S$32.8m to S$65.2m due to associate Tigerair Mandala’s operating losses (S$35.3m) and shutdown costs (S$14.6m). Correspondingly, shareholder’s equity was eroded by 22.5% QoQ to S$216.1m, or almost half of the S$469.7m a year ago.

Remaining Singapore operations unpromising

Tigerair Singapore, the sole remaining TR operation, reported an operating loss of S$19.8m in 1QFY15 (vs. operating profit of S$5.9m in 1QFY14). Revenue growth (+3.2% YoY to S$166.0m) stemmed from capacity growth (+14.8%) and improved load factor (+0.8ppt). However, this was more than offset by: 1) weaker yield (-11.5% to 6.24 S-cent/rpk), and increase in unit cost (+4.5% to 6.03 S-cent/ask). Correspondingly, breakeven load factor is at an exceedingly high 96.7%, which essentially implies that Tigerair Singapore cannot breakeven (maximum PLF was 89% in the past three years). But we also note that there are signs of bottoming out as there is yield drop moderates QoQ (from -7.3% in 4QFY14 to -2.2% in 1QFY15) on top of PLF improvements. Management guided that they would improve PLF before yield, though we think the latter is more a function of competition, which is beyond management’s control.

Expect further provisions ahead

Four aircraft are returned to TR from the now-defunct Tigerair Mandala. We understand from management that as planes’ deployment are still being assessed, provisions have not been made. Unless the new Tigerair Taiwan venture can absorb them, we think provisions will be made eventually because: 1) prior eight grounded aircraft suggests lack of redeployment, leasing or sales opportunities, and 2) 1QFY15 aircraft utilisation decreased by 9.0% YoY to 11.3/aircraft/day, thus it is unlikely more planes will be operated. We maintain SELL with S$0.30 fair value estimate.

Source: OCBC Research - 24 Jul 2014