Group CEO of bleeding Tigerair steps down

[SINGAPORE] In a surprise announcement, embattled budget carrier Tiger Airways Holdings (Tigerair) said yesterday that group chief executive Koay Peng Yen would be stepping down after less than two years on the job, just days after the group unveiled another set of full-year losses.

SIA Cargo president Lee Lik Hsin, who has served on the Tigerair board as Singapore Airlines's representative, will take over the position starting on Monday.

Last Friday, the budget carrier revealed a loss of $223 million for the financial year ended March 31, 2014 - its third consecutive year of losses and almost five times the $45.39 million of the previous fiscal year.

Mr Lee, 43, will be the third new chief that Tigerair has appointed since 2011. Mr Koay took over the helm in 2012 from Chin Yau Seng, who is now senior vice-president (sales & marketing). Mr Chin had assumed the role from Tony Davis in 2011.

Bringing in a seasoned SIA veteran - at a point when the budget carrier is sinking deeper into the red - is probably a calculated move, industry observers noted. Major shareholder SIA owns a 40 per cent stake in Tigerair.

"He (Mr Lee) has been tested in demanding assignments during his 20-year career in SIA," Tigerair said in a statement. "He brings with him a wealth of experience at the senior level in the airline industry."

Mr Lee has held various appointments in SIA, including senior vice-president of corporate planning and regional vice-president for North Asia. He was also previously a director with SIA's wholly owned budget carrier, Scoot.

Mr Koay, 48, will serve as an adviser to the board and remain a non-executive director until Tigerair's annual general meeting on July 31.

The group has been struggling with a challenging operating environment, as overcapacity in the region hurt Tigerair Singapore and its associates faced intensifying competition at home.

During Mr Koay's 21-month tenure, Tigerair kick-started restructuring efforts, which included slashing underperforming routes, right-sizing its fleet by grounding planes and cancelling an order for new aircraft, in addition to paring its stakes in its loss-making cubs while adopting an asset-light strategy.

"Turning around a company is a process and not an overnight activity," Mr Koay told The Business Times. "Having laid the groundwork for the turnaround of Tigerair, it is now an appropriate time for me to hand over the reins. I am also glad that the company will be in good hands with Lik Hsin at the helm."

Mr Koay, a shipping industry veteran who was formerly a director at Kuok Group-linked Pacific Carriers and PaxOcean Engineering, oversaw a 60 per cent stake sale in Tigerair Australia to Virgin Australia, as well as the divestment of the group's 40 per cent interest in Tigerair Philippines to Cebu Pacific.

Tigerair has acknowledged that it is reconsidering its investment in bleeding cub Tigerair Mandala, amid reports that Garuda subsidiary Citilink could be sniffing around.

UOB Kay Hian analyst K Ajith reckons that a key role of the incoming chief executive would be to stem the cash bleed, which SIA will be keen to see happen as well. "(The group) has to focus on the Singapore operations, streamline (capacity) if need be, and minimise the cash burn. Much of the cash burn is happening at the associate level."

For the fourth quarter of the recently concluded financial year, its most established unit, Tigerair Singapore, turned in an operating loss of $29.4 million, compared to an operating profit of $21.5 million a year earlier, as revenue and yields declined.

Mr Ajith also wondered if it was prudent for the group to have exposed itself to risks by providing guarantees for its associates, given Mandala Airlines' (as it was previously known) own debt-related issues in the past.

"Why is Tigerair only now considering divesting Tigerair Mandala?" he added.

In a research note, CAPA - Centre for Aviation noted that while there should be improvements over the medium to long run, the group's short-term outlook remained cloudy. Efforts to build partnerships and boost connection traffic will probably remain secondary to the group's primary focus to regain its financial footing.

In the stock market yesterday, Tigerair shares closed unchanged at 40.5 cents.