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Tiger blames losses on stiff domestic competition

25 Jan 2013 THE AGE - MATT O'SULLIVAN



VIRGIN Australia's prospective bedfellow, Tiger Australia, has blamed a widening in losses in the third quarter on stiffer competition in the domestic market.

In an ominous sign for all of this country's airlines, Tiger has posted an operating loss of $S13 million ($10 million) in the three months to December, compared with a loss of $S8.6 million previously.

It brings to an end a gradual narrowing of losses over prior quarters as Tiger returned to full operation following its forced grounding due to safety concerns in 2011.

Tiger said the larger loss in Australia was largely due to a 12 per cent drop in yields - or returns from fares - due to "stiff competition in the domestic market and rising costs of operations". And it has warned that the intense competition in Australia will continue to keep yields under pressure in the near term.

The budget airline's costs rose by 75 per cent to $S86 million during the quarter as it began new routes, including Melbourne-Adelaide and Sydney-Mackay.

The battle between the country's four largest airlines has led to heavy discounting of fares over the last year. Qantas and Virgin Australia will reveal the extent of the financial pain next month when they deliver their first-half results for a period which is typically their strongest.

"The competition has kept both yields and load factors depressed," Tiger's chief financial officer, Chin Sak Hin, said.

The latest result takes Tiger's accumulated losses since launching services in Australia in 2007 to more than $216 million. The Australian operations again weighed on the performance of its parent, Tiger Airways Holdings, which is listed on the Singaporean stock exchange.

The parent company, in which Singapore Airlines is the major shareholder, made $S2 million in after-tax profits in the third quarter, compared with a loss of $S17 million previously. Its Singaporean flying operations made an operating profit of $S27 million in the latest quarter.

The Australian Competition and Consumer Commission will decide on February 7 whether to allow Virgin to take a controlling stake in Tiger's Australian operations.

Virgin's purchase of a 60 per cent stake is aimed at giving Australia's second-largest airline its own dual-brand strategy to counter Qantas and Jetstar. Under the plans, Tiger's Australian fleet will be boosted from 11 single-aisle A320 planes to up to 35 over the next five years as it takes on Jetstar.