SIA keeps Tigerair aloft with cash injection
Contributors are not employed, compensated or governed by TD, opinions and statements are from the contributor directly
Singapore International Airlines (SIA) has stepped in to keep struggling budget carrier, Tigerair, in business.
The national carrier announced this week that it will pump SG$140 million (US$110 million) cash into the ailing business which reported worsening losses in the quarter ended 30 September. The injected funds will be part of a proposed rights issue that Tigerair announced on Friday to raise SG$234 million.
The proposed offering of 1.2million shares at a discounted price of SG$0.20 came as the budget carrier announced quarterly losses of SG$182.4 million.
As a 40% shareholder, SIA will subscribe to entitlement and excess rights shares worth up to SG$140 million, in what analysts have described as a rescue bid. It will also convert its 189.39 million perpetual convertible capital securities (PCCS) holdings into shares, which could see SIA take a 71% share in Tigerair.
In another development, Tigerair said it was exiting Australia, barely months after it exited Indonesia and the Philippines. Tiger Air Holdings sold its 40% stake in its loss making Australian venture to majority shareholder, Virgin Australia, for AU$1, inflicting a net loss of SG$60.1 on its original investment.
“We need to now stem the losses arising from this joint venture and divert our resources back towards our Singapore-based airline in the execution of the turnaround plan,” said Lee Lik Hsin, Tiger’s chief executive.
Shareholders and analysts are now asking questions over the future of the airline and its strategy for growth.
“They need to address a strategy going forward because they have divested Australia, they are out of Indonesia, out of the Philippines, so what next now?” Derrick Heng, analyst at Maybank-Kim Eng, told The Straits Times.
“Are they going to stay as a standalone unit just in Singapore? That will put them at a disadvantage to other players like AirAsia, which is growing across the whole region.”
Comments are closed.