ENDGAME FOR TIGER AIRWAYS?

Dino D'Amore
By Dino D'Amore July 4, 2011 08:34

ENDGAME FOR TIGER AIRWAYS?

On the 21st April 2011 we reported here that Tiger’s days were numbered after aircraft were grounded by a show clause, now it seems the end game for Tiger Airways is upon us.

Australia’s grounding of Tiger Airways on safety grounds sent shares of the Singapore-based, low-cost airline falling by as much as 16% to a record low today. The fall boosted the share price of its Australian rivals Qantas Airways and Virgin Australia, both which climbed to one-month highs after the Civil Aviation Safety Authority grounded Tiger’s local operations over the weekend for at least a week – right at the start of Australia’s school-holiday season. Tiger’s affected passengers will be offered a full refund or deferred credit for any flights this week, the company said in a statement on its website and also confirmed that it is cooperating fully with the industry regulator.

The grounding triggered a stock ratings upgrade for Virgin to ‘outperform’ from ‘neutral’ by Macquarie Research as it expected Virgin to gain the most from Tiger’s woes. Tiger’s grounding is expected to leave around 40,000 passengers stranded over the week. Meanwhile in Singapore, Phillip Securities cut Tiger Airways to ‘trading sell’ from ‘hold’ and lowered its target price to S$1.07 from S$1.60.

Tiger Airways shares traded 8% down at S$1.085 at the close. Virgin climbed 7% and Qantas rose 5%. Tiger Airways on Sunday put the cost of the grounding of its 10 Airbus A320 aircraft in Australia at about $1.6 million a week.

Tiger Airways international chief executive Tony Davis flew in for crisis talks with the Australian Civil Aviation Safety Authority this morning over the regulator’s decision to ground the Australian division of the airline. It is understood that Singapore Airlines reps were also in the meeting.

The grounding of Tiger’s fleet has resulted in an immediate loss of 5% of domestic Australian capacity. It has also temporarily removed a major price discounter from the market.

While Tiger only accounts for about 5% of Australia’s domestic travel market, its exit could push ticket prices up by about 15%. An exit would benefit Virgin Australia most as it has the greatest overlap of domestic capacity with Tiger, a fact not lost on the markets.

Separately, Australian authorities said they were investigating an incident involving a Tiger Airways A320 aircraft that was reported to have descended below the published minimum altitude while approaching Avalon Airport, near Melbourne on June 30.

Meanwhile: 2011 arrivals details are out

International tourist arrivals to all UNWTO monitored countries grew by 4.5% in the first four months of 2011, according to the UNWTO World Tourism Barometer. Growth was positive in all regions with the exception of the Middle East and some sub-regions achieved double-digit growth, namely South America which is up 17%, South Asia up 14% and South-East Asia up 10%.

The report stated: “Global tourism continues to consolidate the recovery of 2010 despite the impact of recent developments in the Middle East and North Africa, as well as the tragic events in Japan, which are affecting travel flows to these regions.”

“We should nonetheless remain vigilant as we face other persisting uncertainties including high unemployment and increased public austerity measures,” said UNWTO secretary-general Taleb Rifai. UNWTO expects that destinations currently facing difficulties will see demand recover towards the end of the year.

Between January and April 2011, destinations worldwide recorded 268 million international tourist arrivals, some 12 million more than the 256 million registered in the same period in 2010.

The Middle East was down -14% and North Africa was down by 11%, both have been considerably affected by recent developments. Nonetheless, some destinations in the Middle East have shown particularly positive results, with Saudi Arabia and Dubai remaining strong.

Dino D'Amore
By Dino D'Amore July 4, 2011 08:34
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