SINGAPORE — Tigerair is delaying immediate plans to expand its fleet by cancelling an existing aircraft order for this year and the next, signing a new deal instead for more fuel-efficient models from 2018, as the budget carrier adjusts its business strategy amid concerns of overcapacity in the region.

The move will allow it to “optimally manage its capacity going forward, improve its cost efficiency and advance its fleet modernisation plan”, Tigerair said in a statement yesterday. It will also help the airline save an estimated S$40 million annually on fuel, it added.

The new order for 37 Airbus A320neo aircraft is valued at US$3.8 billion (S$4.8 billion) and scheduled for delivery over eight years from 2018. The new model is expected to gradually replace Tigerair’s current A320ceo fleet in Singapore that will be phased out when the leases expire. Tigerair also has an option to increase the order by up to 13 aircraft.

The existing order that Tigerair cancelled was for nine A320s, which were scheduled for delivery this year and the next.

“We have re-calibrated our strategy and taken the necessary steps to re-position Tigerair for a brighter future. This deal effectively dissipates some concerns over a potential capacity overhang in the next couple of years. It also allows us to continue building on our leadership position in budget travel at a measured pace,” said Mr Koay Peng Yen, Group Chief Executive of Tigerair.

The move by the airline, which is 40 per cent owned by Singapore Airlines, is in line with its competitors’ decisions to scale back expansion and be more “capacity disciplined”, noted Flightglobal’s Asia Managing Editor Greg Waldron.

AirAsia said last month it was taking a “back seat” and deferring deliveries of 19 new planes initially planned for this year and the next, while Jetstar’s parent company Qantas announced that it was suspending the budget carrier’s growth plans.

“There seems to be a lot of capacity coming into the market in recent years and basically Tiger’s move is consistent with what we saw AirAsia do a month ago and Jetstar doesn’t look to be growing, so it seems like some of the low-cost carriers are having second thoughts about adding capacity at the current moment,” Mr Waldron told TODAY.

“Tiger has been losing money for quite some time, so I think this is probably part of the strategy to realign and focus a bit more on their Singapore business ... This move is designed at managing their capacity growth. It’s a very competitive market right now so it makes sense to cancel some aircraft and order more for later.”

Tigerair, which has seen its share price plunge nearly 20 per cent this year, is trying to avoid a third consecutive year of loss.

Last week, it completed the disposal of its 40 per cent stake in Tigerair Philippines to Cebu Air, after experiencing million-dollar losses since buying into the unit almost two years ago.

Shares in Tigerair closed up 1.2 per cent at S$0.41 yesterday.