Tiger Airways shares slide to record low on Australia grounding
July 4, 2011
(Reuters) – Australia’s grounding of Tiger Airways (TAHL.SI) on safety grounds sent shares of the Singapore budget airline tumbling as much as 16 percent to a record low on Monday and boosted those of its bigger rivals down under, which hope to steal market share and end a price war.
Shares in Australia’s two biggest airlines, Qantas Airways (QAN.AX) and Virgin Australia (VBA.AX), both climbed to one-month highs after the Civil Aviation Safety Authority grounded Tiger’s local operations at the weekend for at least a week, right at the start of Australia’s school-holiday season.
The move, the first time a carrier’s entire fleet has been grounded in Australia, comes after the regulator issued a “show cause” notice to Tiger Airways Australia in March and later imposed a number of conditions on the carrier.
The grounding triggered a stock ratings upgrade for Virgin to ‘outperform’ from ‘neutral’ by Macquarie Research as it expected Virgin to gain the most from Tiger’s troubles, which is expected to leave around 40,000 passengers stranded over the week.
Macquarie said the regulator’s concerns raised the prospect of an extended grounding.
Tiger Airways on Sunday put the cost of the grounding of its 10 Airbus (EAD.PA) A320 aircraft in Australia at about $1.6 million a week.
In Singapore, Phillip Securities cut Tiger Airways to ‘trading sell’ from ‘hold’ and lowered its target price to S$1.07 from S$1.60.
Tiger Airways shares erased some of its losses and traded 8 percent down at S$1.085. Virgin climbed 7 percent and Qantas rose 5 percent.
Singapore Airlines (SIAL.SI) controls about a third of the budget carrier but is not involved in its operation. Singapore state investor Temasek TEM.UL owns about 8 percent of the carrier.