Tiger Airways Holdings Limited Continues to Bleed

Budget carrier, Tiger Airways Holdings Limited (SGX: J7X), which is 40% held by Singapore Airlines Ltd. (SGX: C6L), saw more losses in the half year ended 30 September 2014 (1H 2015). This was announced this morning by the company.

Revenue for 1H 2015 came in at S$315.7 million, a drop of 21.1% year-on-year while net loss was at S$247.6 million, which pales in comparison to the net loss of S$8.9 million seen exactly a year ago.

The drop in revenue was due to the exclusion of Tigerair Australia, which ceased to be a subsidiary of Tiger Airways with effect from July last year, and weaker operating performance of Tigerair Singapore.

The bigger net loss for the latest period was attributed largely to one-off expenses comprising of S$99.3 million provision for sublease of surplus aircraft and a S$59.8 million loss from divestment of its remaining 40% stake in Tigerair Australia. Yesterday, the budget carrier signed an agreement with Virgin Australia to sell its remaining 40% stake in Tigerair Australia for AU$1. The branding and website distribution arrangements continue and Tiger Airways will be getting franchise revenues from them.

As of 30 September 2014, the firm had a total debt of S$345.2 million and a cash balance of S$135.6 million. This translates to a net debt position of around S$210 million. Six months ago, Tiger Airways had a slightly stronger balance sheet as it had a net debt position of approximately S$188 million.

To fortify its balance sheet, the airline also announced a rights issue to raise up to S$234 million by issuing 1.2 billion new shares. For every 100 shares held in the company, 85 rights shares will be issued at a price of S$0.20 per rights share.

Singapore Airlines, Tiger Airway’s largest shareholder, will be subscribing to the rights allocated to it and also subscribe for excess rights shares, totalling up to S$140 million. But before doing that, it will raise its stake in Tiger Airways from the current 40% to around 55%, by converting its perpetual convertible capital securities holdings into shares. This will make Tiger Airways a subsidiary of SIA. The rights issue is expected to be completed in January next year, upon approval from its shareholders at an extraordinary general meeting that will be convened at a later date.

Even though Tiger Airways saw a net loss of S$248 million, it generated close to S$19 million in cash flow from operations due to adding back of non-cash items like the one-off expenses stated above and working capital changes. Comparatively, in 1H 2014, it generated only S$105,000 in cash flow from operations.

Mr Lee Lik Hsin, Group Chief Executive Officer of the airline, said, “We resolved our excess capacity issues through the sublease arrangements made for the surplus aircraft, and we also stemmed further losses from our overseas venture. We are heartened by SIA’s support in this Rights Issue. We are already working closely with Scoot, and look forward to further collaboration with the rest of the SIA Group.”

Tiger Airways went public in January 2010 at a price of S$1.50 to much fanfare. The public offering was so popular that public offer subscription rate was around 21 times. The hype sizzled soon after as four years later and nine months later, the shares are down some 79% and is currently going at S$0.305 apiece. In contrast, Singapore benchmark index, the Straits Times Index (SGX: ^STI), is up around 15% during the same period.

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