Reuters – Singapore’s Tiger Airways Ltd (TAHL.SI) aims to sell or close its Indonesian joint venture unless there are signs of it turning around this year, people familiar with the matter said.
PT Mandala Airlines resumed flights in 2012 after financial restructuring under which Tiger bought a one-third stake, raised to 35.8 percent in September. Even so, Tiger lost nearly S$40 million ($31.6 million) in the venture in April-December.
Tiger and Indonesian private equity firm Saratoga, which owns 51 percent of the venture, are now unwilling to make further investment, said the people, who were not authorized to speak publicly on the matter and so declined to be identified.
“The writing is on the wall,” said one company source.
Last month, the venture now known as Tigerair Mandala suspended nine routes or about 40 percent of its capacity in a market where larger competitors such as Lion Air and Garuda Indonesia (GIAA.JK) are adding planes to more destinations in the 17,000-island archipelago.
“The more it flies, the more it loses money as nearly every route is below break-even,” said one of the people, referring to Tigerair Mandala. “Tiger is subscale in Indonesia. Either it gets out or grows out of trouble.”
A spokesman for Tigerair Mandala said both Tiger and Saratoga are committed to supporting the company “for a long period to ensure business sustainability.”
Tiger Airways, about 40 percent owned by Singapore Airlines Ltd (SIAL.SI), did not respond to queries from Reuters.
Tiger would be facing its second exit this year if it sells or closes Tigerair Mandala, after agreeing in January to sell its loss-incurring Philippine business to Cebu Air Inc (CEB.PS) parent Cebu Pacific.
(Editing by Rachel Armstrong and Christopher Cushing)