What Does Tigerair’s Latest Operating Statistics Mean for Its Business?

No-frills carrier Tiger Airways Holdings (SGX: J7X), more commonly known as Tigerair, has just released its operating statistics for May 2014 for both Tigerair Singapore and its associate, Tigerair Mandala.

The airline, which is 40%-owned by full-service carrier Singapore Airlines (SGX: C6L), happens to be one of the smaller budget airlines in the region. Due to its lack of scale, it has not been able to bring down its operating costs to a sufficient level to make profits; Tigerair has made cumulative losses of S$373 million in the three years ended 31 March 2014.

The company had also recently announced the hiring of a new CEO, Mr. Lee Lik Hsin. Since then, the company has been busy restructuring its international expansion strategy and cutting flights in unprofitable routes.

“Come what May…”

Due to the restructuring efforts of the airline, Tigerair Mandala has cut about 30.8% of its available seat-km (ASK) in May 2014 as compared to a year ago. The ASK metric measures the number of seats on scheduled flights multiplied by the kilometres flown.

Although Tigerair Mandala’s passenger load factor had dropped very slightly from 83.1% a year ago to 82.2%, there were huge declines in total passenger numbers as well as the revenue passenger-km (RPK); those two metrics had fallen by 44.6% and 31.5% respectively.  The RPK  figure, which is a measure for passenger demand for the airline, is given as the total number of paying passengers multiplied by the total distance flown.

As Tigerair is still in the midst of its restructuring, we should expect to see more cuts in its operating statistics in the coming months.

Home’s still the best

Singapore continues to be the only market that is relatively better for the company. RPK is up 17.2% year-on-year to 881 million for the month while both the ASK and passenger load factor had improved by 16% and 0.9%, respectively, from a year ago.

Going forward, we might see Tigerair’s management place more focus on the airlines’ Singapore-based business in their attempt to turn the company around. The short-term picture for air travel in the Asian region is clouded by both the political crisis in Thailand and Malaysian Airlines’ missing flight, MH370. These are negative impacts for Tigerair in the short run.

That’s not to say, however, that the long-term picture for Tigerair is clearer. There’s still plenty of room to wonder if Tigerair can ever manage to grow sustainably.

Foolish Summary

Billionaire investor Warren Buffett was only half in jest when he once joked that airlines make for terrible investments. Tigerair has plenty of work to do to right its course.

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook  to keep up-to-date with our latest news and articles.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.