Will the Tiger get its claws on the kangaroo with its IPO?
Tiger Airways, the budget carrier in which Singapore Airlines has a stake of 49 percent, may sell shares in an initial public offering within the next two years, as it plans to expand overseas.
“Conditions must be right and we have to have an agreement with all the shareholders,” Singapore Airlines' Chief Executive Officer Chew Choon Seng said. He added that a sale this year will be “unrealistic”.
Tiger Airways plans to open as many as five bases overseas within three years, as it faces increasing competition Asia from at least 17 other budget carriers within Southeast Asia such as Jet Star Asia. Tiger Airways said it has received Australian approval to fly to the western city of Perth in Western Australia state, the carrier's second destination after Darwin. Starting March 23, the carrier will fly four times a week to Perth and intends to expand the schedule to a daily basis from May onwards.
“They will be well-received by the market because of their position in Singapore, who their shareholders are, their fleet expansion and their move into Australia,” said Peter Drolet, an analyst at UOB Kay Hian.
Tiger Airways’ decision to expand overseas has drawn mixed reactions. Critics say that Tiger Airways’ entrance into the Australia might trigger the mother of all low-cost domestic airfare wars against Virgin Blue and Qantas. Tiger is also expected to test the nerves of unions, given signs it could seek individual workplace agreement.
Since its birth, the budget airline industry has been increasingly competitive in most countries. With a history of other budget airlines such as Valuair making huge losses, is Tiger Airways’ decision to go ahead with its plans to expand overseas, risking unreasonable protectionist measures and fatal price wars? Your thoughts.
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