No takeover plans for Tigerair, but SIA eyes more integration

SINGAPORE — Singapore Airlines (SIA) is not considering a full takeover bid for Tiger Airways (Tigerair), but it will focus on helping its loss-making associate recover through stronger network cooperation, following SIA’s recent move to increase its stake in the low-cost carrier, says SIA chief executive Goh Choon Phong.

Speaking at SIA’s latest results briefing yesterday, Mr Goh added that Tigerair remains an integral part of the group’s growth plans and has been making progress in consolidating its business.

Tigerair reported a net loss of S$182.4 million for its fiscal second quarter on Oct 17. With its other units such as SilkAir and SIA Engineering also suffering weaker growth, SIA’s net profit for the quarter ended September declined 43.5 per cent on-year to S$91 million.

Mr Goh said: “We intend to increase our stakes (in Tigerair) to a controlling interest, because we believe that SIA, with its scale and connectivity distribution, can benefit Tigerair beyond its alliance with Scoot.”

“A takeover offer for Tigerair is, however, not under consideration. Our focus now is to see in what manner we can help Tigerair back to financial health.”

SIA’s application to increase its stake in Tigerair to around 55 per cent from 40 per cent was submitted to the Competition Commission of Singapore (CCS) for approval last month.

In August, CCS gave the green light for Tigerair and SIA’s low-cost long-haul subsidiary Scoot to form an alliance.

Despite its persistent financial losses, Tigerair remains integral to SIA’s plan to expand its network portfolio via further integration of routes and flights between SIA, its regional wing SilkAir, Scoot and Tigerair.

“These are the four components that will allow us to extend market reach and tap traffic in all segments ... In the case of Tigerair and Scoot, the connecting traffic is less than 5 per cent now — there’s a huge potential we can tap here,” Mr Goh said.

Adding that Tigerair is not a lost cause, he said it is repositioning itself for the future, such as shedding unprofitable overseas joint ventures and taking steps to curb overcapacity.

Mr Brendan Sobie, chief analyst at the Centre for Asia Pacific Aviation, said the worst is likely over for Tigerair and that SIA’s plans for Tigerair will lead to mutual benefits.

“With a controlling stake, SIA can now ensure Tigerair is more aligned with its portfolio strategies,” he said.

But he added that a turnaround is not guaranteed for Tigerair.

“The LCC (low-cost carrier) market remains very competitive and, given its disastrous results in the past two years, any improvement will have to be drastic to be meaningful,” he said.