February 23, 2012

Tiger Airways


DBS Group Research on 22 Feb 2012

TIGER Airways announced that the Indonesian regulator has reactivated PT Mandala Airlines' Air Operator's Certificate (AOC). With the resumption of Mandala flights by April 2012, Tiger will lease three aircraft to Mandala initially, rising to ten by the end of FY2013.

Given that Indonesian regulations require new airlines to have a fleet of 10 aircraft within its first year of operations, this fits in nicely with Tiger's plans.

Air Australia's bankruptcy also comes at a good time for Tiger. While Air Australia was a small player operating seven aircraft mainly out of Brisbane, its exit could lead to higher loads and yields on the lucrative Melbourne-Brisbane sector.

There is now a chance for Tiger to base its aircraft in Brisbane, with the additional catchment area of Gold Coast as well. Tiger is currently operating seven aircraft out of Melbourne and is actively looking for a second base in Australia to expand routes.

If all the above falls into place and Tiger Singapore does not add any new capacity in FY2013, we reckon demand should catch up in Singapore.

Given the improving execution and better visibility, we upgrade the stock to 'buy', with a higher TP of $1.01.
BUY

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