* Could sell or close Tigerair Mandala if no sign of
turnaround this year
* Raised its stake in Tigerair Mandala only in September
* Tigerair Mandala suspends nine routes - or 40 pct capacity
- to focus on profitability
* Tiger Airways shares near record low, down 38 pct over
(Recasts, adds source, venture quotes, market share)
By Anshuman Daga
SINGAPORE, March 3 Singapore's Tiger Airways
Holdings Ltd may be forced out of Indonesia, Southeast
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
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
In contrast, Tigerair Mandala is suspending 9 routes - or
40 percent of its capacity - between February and April to focus
on more profitable routes, so Tiger avoids a repeat of the
nearly S$40 million ($31.6 million) loss incurred through the
affiliate in April-December.
Tiger owns 35.8 percent of Tigerair Mandala, having raised
its stake from a third in September. But Tiger and Indonesian
private equity firm Saratoga, which owns 51 percent, are
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 break-even," the source said. "Tiger is sub-scale
in Indonesia. Either it gets out or grows out of trouble."
Tiger, about 40 percent owned by Singapore Airlines Ltd
, did not respond to queries from Reuters.
A spokesman for Tigerair Mandala said Tiger and Saratoga are
committed to supporting the company "for a long period to ensure
Depreciation of the Indonesian rupiah in recent months and
increases in fuel prices have significantly pushed up
operational costs for all airlines, the spokesman said.
DWARFED BY RIVALS
Tiger has changed its expansion strategy under Group Chief
Executive Koay Peng Yen who joined in August 2012 from the
shipping industry. Instead of significant stakes in joint
ventures, it now aims to boost growth through alliances so as
not to over-stretch resources.
The airline sold its majority stake in a then-unprofitable
Australian venture soon after Koay assumed office, and in
December said it would hold a 10 percent stake in Tigerair
Taiwan, an alliance with China Airlines Ltd.
In Indonesia, a market with 70 million passengers, Tiger's
joint venture is estimated to have a share of only 1 to 2
percent in 2013, according to the CAPA Centre for Aviation.
That compared with the 4 to 5 percent of Malaysia's AirAsia
Bhd's unprofitable venture, which in turn paled in
comparison to the 46 percent of Lion Air and 28 percent of
Garuda and fast-growing subsidiary Citilink.
The trials of Tiger's overseas ventures, together with
impairment charges and industry over-capacity, widened the
airline's overall net loss to S$127.5 million in April-December
from S$30 million a year earlier.
That result left shares of Tiger Airways trading near a
record low of 0.41 Singapore cents. That is down 38 percent over
the past year, making Tiger's shares among the worst performers
in small and mid-tier airlines globally, data from StarMine
"Tiger doesn't have the balance sheet or the ability to go
back to shareholders" to pump more money into its Indonesian
venture, one of the people said.
Just a year ago, Tiger highlighted its growing operations at
home and ventures in Indonesia and the Philippines to raise
nearly S$300 million to fund expansion and strengthen its
($1 = 1.2667 Singapore dollars)
(Editing by Rachel Armstrong and Christopher Cushing)