Questions linger over Tiger’s future (The Sydney Morning Herald)
July 8, 2011
Is it the end of Tiger Airways Australia, and with it low airfares?
The grounded budget airline maintains it will be back in Australian skies, and for the long term. Others aren’t so sure.
‘‘In the long term, if I was a betting man, I’d say they wouldn’t be around this time next year,’’ Steve Purvinas from the aircraft engineers union said
Tiger’s immediate future is in the hands of the Civil Aviation Safety Authority (CASA), which took the unprecedented action of grounding an entire airline citing a serious and imminent risk to air safety.
The suspension now runs until August 1, and some industry observers question whether Tiger will be able to turn things around in the next three weeks.
Aviation consultant Neil Hansford, chairman of Strategic Airline Solutions, doesn’t believe Tiger will be back in the air in under three to six months given the systemic nature of its problems.
‘‘You have to rebuild it,’’ Mr Hansford said. ‘‘This is like a tsunami. Once something’s been flattened you’ve got to rebuild.’’
For its part, Tiger says it is confident it can resolve the regulator’s safety concerns and is committed to remaining in the Australian market.
Whether it does have a long-term future in Australia ultimately depends on its Singapore-based parent company Tiger Airways Holdings and the depth of its pockets.
UNSW School of Aviation senior lecturer Ian Douglas says getting over the regulatory hurdles is the small task.
‘‘If they’re grounded for a month, there’s $600 million worth of aircraft parked there accruing costs and charges but generating nothing, so they’re haemorrhaging cash at the moment,’’ Mr Douglas said. ‘‘Beyond that, it’s starting almost from square one to build a customer base again.
‘‘That’s an airline that’s never turned a profit in this marketplace, that’s operating a model that I think is probably inappropriate to the Australian market.
‘‘I really don’t think they’ve got the strength to get back and re-establish it.’’
Mr Douglas thinks there’s a strong possibility that Tiger will end up pulling out of Australia, faced with two or three years of rebuilding from scratch in a market where its brand has been badly damaged.
‘‘That just looks like a task too far, if there are other things you could be doing with those resources,’’ he said. ‘‘So you might just quietly move a few (aircraft) out of the market, scale down and perhaps abandon the market totally.’’
Complicating matters is the fact that Singapore Airlines, a key financial backer of Tiger Airways Holdings, is forming an alliance with Virgin Australia.
Mr Hansford, who says Tiger Airways Australia has lost about $70 million since it started flying here in November 2007, says there’s no longer the imperative for the Singapore carriers to have a presence in Australia.
‘‘They don’t really have to be (in Australia) any more because they have the relationship with Virgin,’’ he said. ‘‘Their need to have a low-cost airline to feed them in Australia is now not the case because they’ve now got the code share arrangements with Virgin.’’
In what it says is a sign of its commitment to the Australian market, Tiger Airways Holdings chief executive Tony Davis has instead become CEO of the Australian subsidiary, replacing Crawford Rix who has quit the airline after 13 months in the role.
‘‘The board has an absolute commitment to the long-term success of this business in Australia,’’ said Mr Davis, who flew to Melbourne to head the discussions with CASA.
‘‘We’re investing significantly in the long-term future of Tiger Australia, and my appointment to lead the organisation is a tangible demonstration of that.’’
Tiger says the grounding is costing it $S2 million ($1.5 million) a week, but Mr Davis told ABC TV that ‘‘it’s an investment in the long-term future of the business’’.
Mr Davis is reviewing the Australian operation and Tiger says it’s confident it can address the regulator’s safety concerns.
CASA first put Tiger on notice in March, citing concerns about aircraft maintenance and pilot proficiency, before imposing a number of conditions on Tiger’s air operator’s certificate. It grounded all its flights after two incidents where pilots flew low into Melbourne airports.
Professor Jason Middleton, head of the UNSW School of Aviation, points to the long list of concerns detailed by CASA.
‘‘That’s not one matter, that’s a set of systemic matters that Tiger needs to address,’’ he said.
Industry players like the aviation engineers union and the pilots association say Tiger’s woes have highlighted problems with the low-cost carrier model.
Mr Purvinas, federal secretary of the Australian Licenced Aircraft Engineers Association, says the problem lies with offering airfares at unsustainable levels.
Tiger’s staple has been the $29 sales for flights between Melbourne and Sydney, but it has also been offering tens of thousands of seats for $1 return on 18 of its 21 routes, including the Melbourne-to-Perth trip.
‘‘In order to do that they cut costs in other areas,’’ Mr Purvinas said. ‘‘When they’re offering fares at some of the rates that they do, the fares don’t even cover the costs of the fuel.
‘‘It’s impossible for them to continue running an airline like that and unfortunately it drags down all of the others as well because they have to try and match them for price and then they’re always looking at cutting costs.’’
Australian and International Pilots Association vice-president Richard Woodward said Tiger’s woes should be a wake-up call to get moving on aviation safety reform, particularly in light of recent recommendations from a Senate inquiry.
‘‘Our concerns about diminishing professional standards in this country seem to be confirmed with what’s going on with Tiger,’’ Captain Woodward said. ‘‘For the Civil Aviation Safety Authority to act like they’ve done, they’ve done that because they’ve got serious concerns. They don’t lightly ground an airline.’’
Complete article in The Sydney Morning Herald (Australia)