Tiger Air

Tiger Air: likely to see near term pressure on share price, following the divestment of shares by substantial sh/h, and news reports on flight cancellations due to pilot shortages. Tiger’s share price has fallen from a high of $2.24, after a disappointing set of 1QFYMar11 results and analyst downgrades. Price momentum is weak. Support at $1.90, resistance at $2.00…

Two substantial sh/h, Indigo Parners (a PE firm), and Ryanasia (unit of Ryan Air) have sold part of their equity interests in Tiger. Placement of 65.8m shares, or 12.3% of shares out, represents half of the combined stake of Indigo and Ryanasia prior to the sale, and was completed at $1.90/sh. The transaction is not unexpected, given both sh/h are pre-IPO investors, and likely to realize some gains after expiry of lock up...

Move could be positive in the longer term, as free float is increased, allowing for better trading liquidity. But negative in near term, due to concerns about share overhang…

Also, Tiger has canceled at least 10 flights over the last 4 days, after losing more than 20 pilots in a wave of resignations in June, amidst an industry wide shortage of pilots. As a budget airline, Tiger is likely to feel the heat more than network carriers like SIA, as it would find it harder to hire, and wage costs as % of expenses are high as well. Expect higher wage costs (Tiger’s pilots earned 30% more in their new jobs) to hit bottom line.