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Key element in place for 'decisive turnaround': Tiger CEO
THE integration with the Singapore Airlines (SIA) group is the key element "for a decisive turnaround and also for future sustainable growth" of Tiger Airways, said Lee Lik Hsin, chief executive of the budget carrier.
Mr Lee - a 20-year veteran of SIA before becoming the CEO of Tiger in May, 2014 - said the latter can benefit from the national carrier's scale and connectivity, now that SIA has taken over control with a higher stake of 55.8 per cent.
Cash-rich SIA came to the rescue of a bleeding Tiger last year, injecting up to S$140 million to plug the budget carrier's haemorrhage after it reported a staggering net loss of S$182.4 million for its fiscal second quarter ended Sept 30, 2014, compared with a net profit of S$23.8 million a year ago. Regional ambitions were also scrapped, culminating in the sale of its remaining 40 per cent stake in its Australian unit to Virgin Australia Holdings for just A$1.
Mr Lee said in Tiger's 2015 Annual Report management had hoped that FY15 would be the year of turnaround but this was not to be as Tiger registered a loss of S$264 million. The losses were contributed by the exit from overseas ventures, charges relating to surplus aircraft, and the operating performance of the Singapore operations.
To-date, the most significant aspect of the integration has been the cooperation progressing between Tigerair and Scoot, SIA's long-haul budget arm.
"Much of it is in revenue synergies, particularly connecting passengers onto each other's networks,'' he said, adding that the market for budget travel in Asia has moved past the initial years of high growth and has become crowded with the entry of new players.
"In this environment, Tigerair can no longer rely on just generating its own point-to-point or connecting traffic for future expansion. We must form partnerships, and Scoot is the most natural partner, since its base in Singapore and complementary network provide the greatest potential for connecting traffic,'' Mr Lee said.
"This partnership will become one of our engines for future growth. Joint venture agreements on routes that we both operate, such as Hong Kong and Bangkok, also result in better performance for both airlines, as we are able to meet the competition with our combined strength.''
He revealed that Tigerair and Scoot, which operate out of the same terminal in Changi Airport, are in discussions to leverage other synergies, like potentially combining their facilities in the terminal.
"Tigerair and Scoot both use the same computer reservations system, and merging our two systems into one will result in more seamless transactions for our customers and cost efficiencies. We aim to report on the outcome of these initiatives during the current FY16,'' Mr Lee said.
Apart from the integration with Scoot, Tiger will also explore "all opportunities for synergies in commercial, operational and other areas" with SIA.
Tiger shares were trading around S$0.305 each at 9.45am on Tuesday.