Restoring The Tiger's Roar: Singapore Airlines Boosts Cash Injections

Restoring The Tiger's Roar: Singapore Airlines Boosts Cash Injections To Prevent Loss Making Affiliate From Going Bust

A Reuters report has provided data that Singapore Airlines will now be injecting USD 110 million to take further control of loss making affiliate and low cost airline Tiger Airways Limited. This budget carrier is in severe need of a rescue as competition in this sector is rife. Singapore Airlines Ltd (SIA) has also scrapped regional plans for Tiger Airlines now given the stiff competition that has pervaded this sector.

Reuters has analysed how an unprecedented quarterly loss has sent shares lower by as much as 10%. SIA will now raise its stakes to around 55% from 40% through conversion of existing securities into shares, according to Tiger Airlines Limited. Tiger Airlines Limited has now planned to rake up a USD 180 million rights issue which amounts to 234 Singaporean dollars.

SIA will be buying as much as S $ 140 million of the new shares and raising the stake to more than 71%, according to the Reuters report. Tiger Airlines Limited has also agreed to sell its remaining stake in the Australian unit to Virgin Airlines Australian Holding for just under 1 Australian dollar. Tiger Airlines has been on a downward spiral for some time now after it had to close its Indonesian unit and sell its Philippines based unit.

Securing growth remains the biggest issue, according to Reuters analysts. What seems equally important is maintenance and running of operations as well. With the infusion of cash, Tiger Airlines may recover on a temporary basis but without growth to sustain it, the low cost airline may bite the dust.

"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," Lee Lik Hsin, Tiger's chief executive remarked during a conference call. Hsin is a veteran corporate leader in SIA and he is also a board member of Tiger Airline besides being its CEO. Reuters suggests a new growth strategy is needed to save the Tiger because low cost rivals such as Lion Air have managed a lion's share of the profits and wield a lost of influence.

SIA needs to rethink its growth strategy in the face of current competition. Given that there are many low cost airlines operating in the space already, what is needed at this moment is that the strategy should have new elements such as codeshare or innovative marketing and advertising that garners more attention. Airlines need to promote their facilities and amenities on a far greater scale if they want to attract passengers. Consider successful Indian airlines such as IndiGo which are using a combination of good marketing and great services to garner record sales and profits. With the right strategy, saving SIA's Tiger may not be hard.