Domestic battle blamed for Tiger losses

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

In an ominous sign for the country's airlines, Tiger 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 previous quarters as Tiger returned to full operations after 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 warned that intense competition in Australia will continue to keep yields under pressure in the near-term. The airline's costs rose 75 per cent to $S86 million in 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. Qantas and Virgin Australia will reveal the damage 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.