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-   -   Virgin's TigerAir losing $2 million a week (https://www.pprune.org/australia-new-zealand-pacific/544200-virgins-tigerair-losing-2-million-week.html)

PammyAnderson 24th Jul 2014 08:03

Virgin's TigerAir losing $2 million a week
 
From the SMH :

Virgin's Tigerair Australia losing $2 million a week


Losses at Virgin Australia's budget airlineTigerair Australia have risen to “alarming levels” of more than $2 million a week amid heated competition in the domestic aviation market, says CIMB analyst Raymond Yap.
Virgin’s joint venture partner, Singapore-based Tigerair, on Wednesday released its accounts for the quarter ended June 30. Tigerair Australia was no longer consolidated into the accounts and instead treated as an associate because the Singapore-based company’s stake fell to 40 per cent. That means disclosure on the Australian arm has been more opaque.
Virgin owns 60 per cent of Tigerair Australia and will release its half year results next month. However, based on the Singapore accounts, Tigerair Australia’s operating losses reached $S33.8 million ($29 million), or around $2.2 million a week in the second quarter of the calendar year on a 100 per cent basis.
The budget carrier only has 13 planes, meaning each one is losing around $171,000 a week.
In the first half, Tigerair Australia’s operating losses nearly doubled to $48 million, from $27.6 million last year, when translated from Singapore dollars.
Mr Yap said he was concerned the outlook for the Australian low-cost carrier, which competes against Qantas Airways’s Jetstar arm, could worsen in the current financial year.
“This is on the back of heavy competition from Qantas, Jetstar Asia and Virgin Australia, which has created continuing yield pressure,” he said.
“With the exception of Melbourne-Sydney (Tigerair Australia’s largest route) and Melbourne-Perth (Tigerair Australia’s sixth-largest route), all of its other routes are expected to see industry-wide capacity expansion in the current quarter, which will exacerbate the present overcapacity.”
Tigerair Australia’s load factors, or percentage of seats filled, have been falling in recent months after it added two new planes to its fleet.
In May, the load factor plunged 14.9 percentage points to 70.3 per cent versus the same month a year earlier, although Virgin in May said early indications were that loads had improved “materially” in the month of June.
Virgin boss John Borghetti is the chairman of Tigerair Australia’s board and the Virgin network management team has been working with the low-cost carrier to optimise its network.
In May, Tigerair said it would abandon flights between Sydney and Melbourne to Alice Springs and between Melbourne and the Sunshine Coast due to low consumer demand, with the changes taking effect on July 22.
Instead, it will boost its frequency on the Sydney-Gold Coast route to four daily from two, while Virgin will lower its frequencies on that route.
Pretty serious and scary numbers. Can Virgin really sustain this operation? Thoughts?

SOPS 24th Jul 2014 08:09

As I have said many times on these pages, when you are selling tickets for less than it costs for the taxi ride to the airport....something is terribly wrong.

SilverSleuth 24th Jul 2014 08:44


Instead, it will boost its frequency on the Sydney-Gold Coast route to four daily from two, while Virgin will lower its frequencies on that route.
This is the part that worries me. We are following Qantas by cutting the decent/expected product and replacing it with the LCC with the assumption people will just use it as they have no choice. Isn't this what Qantas did with Jetstar.
And didn't JB say he would never do this and cannibalise mainline routes? :rolleyes:
Bad luck if you want to fly Melb-OOL in the morning getting there much before lunch, or return in the evening after business.

That's not to mention the $100 mill loss a year they are providing, if this article is correct.....

SOPS 24th Jul 2014 10:16

Well, with the loss that Qantas is supposedly about to announce, perhaps my point is a valid one.

Toruk Macto 24th Jul 2014 10:24

Sick industry when the winner is the one who loses the least .

Berealgetreal 24th Jul 2014 10:47

Airports, Cab companies and Government doing alright out of Aviation. Well balanced.

Australopithecus 24th Jul 2014 12:33

In my forty-five years in and around this airline caper it is my observation that profits can be had in making ground equipment, supplying catering (sometimes), providing cost + ground handling services, consulting to the people with hundreds of aeroplanes and no profit, navigation services, government departments, nav charges, insurance, pilot training, simulator training, crewing agencies, "expert" commentary for hire (that means you, GT!), I.T., reservations systems, security.

In fact, just about anything except operating aeroplanes. Sure, having an airline is sexy, and often fun, but ever since the Wright Brothers not many people have made a go of it without government patronage or court protection (chapter 11 in the US). The problem with the industry is the low barrier to entry of a seemingly endless parade of monied fools who believe that they alone hold the elusive key to aviation success. And the occasional group of investors too blasé to see what psychopaths they have entrusted with their airline.

Vorsicht 24th Jul 2014 12:52

At what point does JB concede that building Qantas Lite isn't of itself a strategy to profitability.

He needs to do something different to the competitor, but that would take an original idea. I don't think he has too many.

dragon man 24th Jul 2014 21:53

Firstly, im not here to bash Jetstar im just concerned about the financial health or lack of financial health of the Qantas group. I think the results to be released in late August will be very ugly. I feel that the Tiger numbers only confirm that. Their load factor is 70%. Jetstar domestic about 77%, however I think Tiger has a lower cost base. Roughly, Jetstar turns over 4 times the revenue of Tiger. If the cost basis favours Tiger by say 3% the Jetstar would lose 4% less per week than Tigers $2 million times 4 for the turnover increase. Not very clear, however I wouldn't be surprised to see Jetstar domestic lose $200/300 million for the financial year. Jetstar international is a shocker and Qf domestic and international not to flash either.

CurtainTwitcher 24th Jul 2014 23:01


Originally Posted by Australopithecus
In my forty-five years in and around this airline caper it is my observation that profits can be had in making ground equipment, supplying catering (sometimes), providing cost + ground handling services, consulting to the people with hundreds of aeroplanes and no profit, navigation services, government departments, nav charges, insurance, pilot training, simulator training, crewing agencies, "expert" commentary for hire (that means you, GT!), I.T., reservations systems, security, leasing & financing aircraft

There fixed it for you Australopithecus. Why so many aircraft, so many different types, why LCC's? Why why why?

Its all about maximising the number of aircraft flying (or parked, as long as the leasing charge is paid). LCC's are merely the mechanism to maximise demand for leasing companies. The normal market mechanism is being driven in reverse. This is a supply, not demand driven market, the Australian market is being force fed capacity for a reason. The Australian market is litterally awash with capacity, yet more aircraft keep arriving.
Leasing companies get their money win lose or draw. Who is behind the leasing & financing.

Anthill 24th Jul 2014 23:24

Answer: Da Big Banks!

Australopithecus, the well know saying is that "In a gold rush, you don't get rich digging holes, you get rich selling shovels" :ok:

KittyKatKaper 25th Jul 2014 04:01

I am not too surprised that Tiger Australia is losing money.
I recently did SYD-ADL-SYD., about 80% full both ways.
One week before doing the ADL-SYD sector they 'rescheduled' it to the next day, no reason given., and customer service was uninformative.
They have a 45-minutes-prior-to-departure check-in time limit so I was definitely on time, but their flights departed 20 minutes late., both times.
They are absolutely anal about trying to charge for any cabin and checked baggage that is even slightly beyond the bought allowance.
Their online booking experience is only slightly better than Jetstar. (but I did get the giggles when I saw the option of paying $3 to 'jump the boarding queue').
I thought airport food prices were high, but the prices of the on-board snacks made me think that they were using gold-foil in the packaging.
Their frequency of service to obscure places like Adelaide is woeful.

Yes yes yes, I know they are a LCC., but along with Jetstar they are an experience that I am highly likely not to repeat.

Chocks Away 25th Jul 2014 04:07

Spot on saying, Anthill and well summed up Austral' :ok:
Sydney Airport Holdings has got a lot to answer for in their charges and onflow effects, just to start with!
I for one would rather snap up an airfare on VA close to the price of the LCCs and gain all the extra "gravy" that is associated with it, such as travel points/upgrade/terminal facilities/interline benefits etc etc.
This I believe is reflected also in the travel figures, as many punters realise that just for abit extra they can get some mayo' with their ticket instead of the LCC "pay for every little bit extra" ticket.
There will always be a place in Oz for a LCC/thongs & singlet-Air, but is the small population able to sustain 2 of them without cannibalising the parent?

Pearly White 25th Jul 2014 05:17

If Tiger folded the tent and gave up, would anybody mind very much?

joblogs1 25th Jul 2014 05:28

Yeah the hundreds of employees....

crewmeal 25th Jul 2014 05:32


As I have said many times on these pages, when you are selling tickets for less than it costs for the taxi ride to the airport....something is terribly wrong.
Very true but LOCOs make up the difference by ripping off customers with their horrendous baggage charges, seat reservations, oversized hand baggage, printing boarding cards, have I missed anything else?

J.L.Seagull 25th Jul 2014 06:19

Food that tastes like said boarding cards!

Cost Index 25th Jul 2014 08:34

Some great observations here, most notably Australopithecus and Anthill :D

Despite all of Qantas' woes, of which there are many, at least they have a massive cash reserve, unlike the shed-load of debt JB has shovelled onto Virgin to pursue his "game plan." Let's hope in the next few years the Aussie dollar doesn't fall, there isn't recession, no job lay-offs, no housing bubble bursting, no downturn in mining capex expenditure etc... oh wait :ooh:

Clearly the "romance is back"... followed by a sore head, a large bill and a strange itching sensation at the end of the night :E

airdualbleedfault 26th Jul 2014 01:35

2 million a week?
What the Irish rocket scientist wouldn't give to lose that little.......


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