Singapore-based low-cost airline group Tiger Aviation is facing fresh roadblocks in its attempt to expand through establishing new bases in other countries, with unexpectedly harsh opposition encountered from rivals in South Korea.
But it says it remains committed to establishing a joint-venture carrier in South Korea, in addition to eyeing new bases in other countries. Chief executive Tony Davis said in an interview with Airline Business that Tiger and its local partner in South Korea remain hopeful that they will be able to launch the new carrier, Incheon Tiger Airways, some time next year.
Tiger announced plans in November last year to launch the new airline in partnership with the municipal government of Incheon, where Seoul's Incheon International Airport is located. The new carrier is to be 49%-owned by Tiger and 51%-owned by the municipal government.
Rival carriers have been trying to block it from going ahead, however. Four local airlines - Jeju Air and Yeongnam Air, along with Korean Air's Jin Air and Asiana Airlines' planned new associate Busan International Air - sent a joint petition to the South Korean government recently calling for it to block Incheon Tiger's establishment.
They have argued in part that the new carrier will create unfair competition and have complained about Tiger being part-owned by an investment arm of the Singapore government. Soon after news of the petition broke, local media reports said plans for the new airline had been shelved, but Davis insists this is not correct and says the partners remain fully committed, as per their original agreement.
"We are confident that the proposed joint venture between the city of Incheon and Tiger meets all of the regulatory and legal requirements to establish an airline in Korea," says Davis. "There are clear consumer benefits. We are confident that the Korean government will see the wider benefits to consumers of increased competition."
South Korea's market, long dominated by only KAL and Asiana, is currently undergoing a major expansion phase, with several new airlines being established as the government has been liberalising its air services policies. Davis says Tiger and the Incheon government see great potential in the South Korean market despite the many other new entrants, adding that it is an important part of Tiger's previously stated goal of adding one new operating base every 12-18 months.
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"We are opportunity-rich at the moment"Tony Davis |
Tiger launched services out of its Singapore base four years ago and now also has a base at Melbourne, from where it operates domestic flights within Australia. It recently announced that it will set up a second Australian base at Adelaide, in South Australia, which Davis says will help it meet its 12-18-month new base timeframe goal.
It currently has four Airbus A320s operating within Australia and will soon be adding a fifth, followed by two smaller A319s.
Out of its Singapore base, Tiger Airways operates eight A320s and in the coming months will be adding a ninth. It has some 60 A320s still on order.
While its Australian operation is in the red, Tiger recently reported a maiden full-year profit from its Singapore operations. It booked a net gain of S$37.8 million ($27 million), and Davis says "very little" of the profit came from aircraft sale and lease-backs, which is can be used as a way to bolster the balance sheet. The profit for the 12 months to 31 March compared with a net loss of S$14.3 million for the same period the previous year. Operating costs increased 32%, but an operating profit of S$23.7 million was booked, compared to an operating loss of S$13.4 million.
It was the first time the carrier reported its earnings, which were previously a closely guarded secret. Singapore Airlines, which owns 49% of Tiger, has said that at group level the low-cost airline booked a profit of nearly S$10 million in the last financial year, when the Australian losses are taken into account.
A long-delayed partnership in the Philippines, meanwhile, finally looks set to come to fruition in some form. In September 2006 Tiger and small Philippine carrier Seair announced plans for a partnership that would see Seair leasing two A320s from Tiger. Seair would operate the aircraft under its own flight code but there would be marketing ties between the two carriers.
Delayed Plans
Original plans called for services to start in early 2007, with flights operating between Clark, outside Manila, and both Cebu and Davao within the Philippines, followed later by international flights to Macau and Singapore.
But plans were badly delayed due in large part to the fact that rival carriers sought to block the arrangements between Seair and Tiger. Seair president Avelino Zapanta says the Civil Aeronautics Board has now given approval after many hearings for the turboprop operator to lease A320s from Tiger. The former head of Philippine Airlines says Seair is now trying to firm up lease arrangements and an implementation schedule with Tiger for these two aircraft.
Davis says that despite the hurdles to date with some of its regional expansion plans, Tiger still remains interested in establishing new bases in other parts of Asia and it is approached regularly by potential partners. "We are opportunity-rich at the moment," he says.
Read our cover interview with Tiger chief executive Tony Davis here: flightglobal.com/tiger
Source: Airline Business
