SIA chief rules out offer for full control of Tiger Airways

Singapore

SINGAPORE Airlines (SIA) might want to tame the Tiger, but it does not want the entire animal in the house. During a briefing on Friday, SIA's CEO Goh Choon Phong took pains to put to rest speculation about a complete takeover of the troubled Tiger Airways.

"At this point in time, a takeover offer for Tiger Airways is not under consideration," he said. Instead, SIA wants to focus on how it can help its haemorrhaging associate back to financial health.

Pressed on why SIA is not planning to make a takeover bid for Tiger, Mr Goh did not elaborate, saying: "I have said all that I want to say on that point."

For now, SIA will content itself with increasing its 40 per cent stake in Tiger to about 55 per cent by converting its perpetual convertible capital securities into new shares in the latter. On top of that, SIA's stake in Tiger could rise to about 71 per cent if a proposed rights issue by Tiger comes to pass.

For the first half of its financial year, SIA's share of Tiger's loss came up to S$129 million, it said on Thursday. Tiger is licking its wounds, having withdrawn from ill-fated forays into the Philippines, Indonesia and Australia. Some of Tiger's losses during the quarter came from the sale of its stake in Tigerair Australia.

"Tiger has been ... doing all the right things in positioning itself for the future...it has cut down on its overseas joint ventures which are not profitable," SIA's Mr Goh said on Friday.

Now, Tiger will pay more attention to its own backyard. Mr Goh said: "... instead of being distracted by all these other issues and other markets ... (they will) ... focus on Singapore which is really where their base is."

Even as SIA is keen to help Tiger put its past behind it, the real work appears to have only just begun. A big part of Tiger's recovery will be aided by deeper cooperation with SIA's long-haul budget carrier Scoot. In August, Scoot and Tiger got antitrust immunity from the Competition Commission of Singapore (CCS), which allows them to cooperate on areas such as scheduling, pricing, as well as sales and marketing.

According to SIA, the teams at Scoot and Tiger have been working on strengthening their cooperation since then. Both sides are trying to align their ground procedures and joint ventures on common routes are being explored.

At the same time, SIA as a group has plenty to offer the ailing Tiger, according to Mr Goh. "With the scale that SIA has, with the connectivity distribution network that SIA has, Tiger will be able to benefit much more beyond just Scoot. And for us to be effective in doing all of that, we need to achieve control," he said.

Elsewhere, SIA is still working on getting its Indian joint-venture airline into the skies. Vistara, a new airline jointly run by SIA and India's Tata Group, was slated to launch its first flight in October, but had been held up by the need for regulatory approval.

According to Mr Goh, part of the delay is because the Indian aviation regulator, the directorate-general of Civil Aviation (DGCA), has been "busy preparing" for an upcoming United States Federal Aviation Administration (FAA) inspection. Earlier this year, India's aviation safety ranking had been downgraded by the FAA and the upcoming inspection is expected to review this decision.

"But ... our team on the ground (and) our partner are working very hard to meet all the requirements and we're hopeful that some approval will be coming in due time," Mr Goh added.

There is also the matter of the 5/20 rule, under which an Indian carrier must be five years old and have a fleet of at least 20 planes in order to fly internationally. Now, the Indian aviation ministry is considering scrapping or amending this rule.

"Of course, we would like the 5/20 rule to be repealed as soon as possible because eventually, we would like Vistara to serve the international routes. When they will be repealed, we don't know, but we are certainly engaging the Indian authorities to present our view on why that's beneficial to Indian carriers," said Mr Goh.

In recent months, SIA's share price has had a choppy ride, sinking from S$10.60 in July to S$9.61 earlier in October. On Friday, its counter closed three Singapore cents lower at S$10.12.

As at Sept 30, 2014, SIA's net asset value per share stood at S$10.96. On Friday morning, Mr Goh said wryly: "The last I checked, our share price was at about S$10.10. So it's still a very good buy."