Tiger Airways Holdings Limited’s (Tigerair) announced last evening that it has signed a 10- year agreement with Airbus relating to the maintenance of its A320ceo aircraft, which commences in early CY16. Tigerair currently operates a fleet of 22 A320ceo and also has 39 A320neo aircraft on firm order, with another 11 on purchase options.

Under the agreement, Airbus will provide Fleet Technical Management (FTM) and Inventory Technical Management (ITM), which will help Tigerair optimize aircraft maintenance and engineering operations. Expected cost savings is ~US$20m over the 10- year contract term. In our view, while this agreement is positive for Tigerair, the cost savings are unlikely to be material amidst the muted outlook of Tigerair over the next 1-2 years. Hence, we keep our forecasts unchanged. Maintain SELL with the same FV of S$0.27.

Source: OCBC Research - 5 Nov 2015