When Tiger began Australian domestic services in November 2007 most of the background commentary in other airlines was that dominant shareholder Singapore Airlines would use it to buy a seat at the table when in due course, trans border rationalisation of airlines in the Asia-Pacific hemisphere took place.
An impolite version of this view was that Tiger Australia was here to repay the courtesy of Qantas setting up Jetstar Asia in Singapore.
A different set of questions now need to be asked, as to how Tiger can be both a low fare leader and a business that doesn’t go broke, given the stance taken on ABC TV’s Lateline program last night, by its ‘new’ Australian CEO, Tony Davis, who until about last Sunday, was running Tiger Airways Holdings and was thus ultimately responsible for both Tiger’s Singapore based operations and those of Tiger Australia.
Those questions weren’t asked. Davis did however leave viewers in no doubt that Tiger Australia would, if he has his way, be rebuilt and relaunched as a safety compliant, and truly safe, competitive and attractive proposition for travellers.
And it should be acknowledged that if the money this costs is spent, and the rules are obeyed, Tiger is back in business, but without any guarantee that it will be sufficiently profitable to survive.
This will be true even if Tiger overcomes the damage done to its brand by itself from November 23, 2007 when the first flights began to until its suspension as a risk to public safety late on July 1 this year, with the turnback to Melbourne of the final flight of that day which had taken off for Cairns when CASA made its order.
Tiger, for consumers, was hell. It was unreliable, unresponsive and tricky to use.
Originally Singapore Airlines had almost half the equity in the Tiger operations but that was sold down during and after the floating of Tiger Airways Holdings on the Singapore Stock Exchange. It remains however the most influential shareholder, with 32.9 per cent of the stock.
If we accept that Tiger came to Australia to in some way provide a strategic advantage to Singapore Airlines we’d reasonably conclude that this failed. Tiger is now just what it says it is, a business that has to get back its licence to fly, gain the confidence of consumers, and make money.
Singapore Airlines has a new strategic partner in Virgin Australia in this much changed environment for Tiger. And Tiger will inevitably be affected in some way by the 100 per cent Singapore Airlines owned and as yet unnamed large jet low cost international carrier it will launch in Australia sometime in 2012 according to current guidance.
It becomes difficult to believe Tiger’s domestic operations in Australia will be of any strategic value to Singapore Airlines from this time on.
What is not understood about Tiger by many is that it was on average collecting somewhere between $60-$90 per Australian passenger in fares and ‘extras’ but not counting taxes, levies and other airport or navigation charges. At the higher end of that scale Tiger can make money if it sells a very high proportion of the seats on each flight for say $80 between Sydney and Melbourne.
But that’s where the bargain hunters find Qantas and Virgin Australia selling a surprisingly large number of competitive fares, and sometimes, to their amusement, for less than offered by Jetstar, which has some very odd fares in the market at times, and some outstanding bargains at others.
If Tony Davis finds himself dealing with increasingly sceptical consumers, who hold him to $29 fares for one way, on which his airline loses money, and are happy to pay his competitors even as much as $129 the other way, then Tiger, a safe Tiger, will be flying in very unsafe skies.