Singapore's Tiger Airways could pull out of Indonesia

SINGAPORE: Singapore’s Tiger Airways Holdings Ltd may be forced out of Indonesia, South-East Asia’s biggest domestic airline market, as its unprofitable joint venture is squeezed out of routes dominated by big-spending local carriers.

Tiger might sell or close Tigerair Mandala in the absence of any signs of the airline turning around this year, such as a significant reduction of losses, people familiar with the matter told Reuters.

Tiger has been streamlining its business to prevent a third straight year of loss, with its latest move being the January sale of Tigerair Philippines in a market where a sharp increase in available seats pushed down ticket prices.

In Indonesia, Tigerair Mandala has a tiny share of a market overwhelmingly dominated by Lion Air group and flag-carrier Garuda Indonesia, who are adding routes and ordering more aircraft.

In contrast, Tigerair Mandala is suspending 9 routes – or 40% of its capacity – between February and April to focus on more profitable routes, so Tiger avoids a repeat of the nearly S$40mil loss incurred through the affiliate in April-December.

Tiger owns 35.8% of Tigerair Mandala, having raised its stake from a third in September. But Tiger and Indonesian private equity firm Saratoga, which owns 51%, were unwilling to make further investment, said the sources, who are not authorised to speak publicly on the matter and so declined to be identified.

“The writing is on the wall,” said one company source.

Tigerair Mandala said in July it would expand its fleet but the number of aircraft has stayed at nine.

“The more it flies, the more it loses money as nearly every route is below breakeven,” the source said. “Tiger is sub-scale in Indonesia. Either it gets out or grows out of trouble.” Tiger, about 40% owned by Singapore Airlines Ltd, did not respond to queries from Reuters. — Reuters