Tigerair

Tigerair: confirmed the sale of 40% stake in SEAir, trading as Tiger Philippines, to Cebu Pacific. Cebu Pacific will pay Tigerair US$7m for the transaction, but Tigerair stands to book an estimated net loss of $13.5m, after netting off SEAir liabilities, forward sales and transaction costs. CSLA highlighted that given YTD losses of $15m, this is a positive. Going forward, both parties will brand themselves as partners and cross-sell tickets on all routes operated by both airlines on their respective websites. Tigerair hopes to completed the transaction by end-March 2014. CSLA points out this might not solve easy capacity issues, as of the 5 aircraft transferred to Cebu, 2 will be returning to Tigerair upon closure, while the 3 additional aircraft subleased to Cebu might return after June. With 6-7 year leases remaining, the excess capacity must be absorbed in Singapore or Indonesia. CSLA highlights the exiting of unviable businesses and plans to link with China Airlines and Spicejet syncs with the strategy towards an asset light model, but CSLA highlights this is low margin and they need critical mass in the core business to succeed. While CS also views these as positive, it highlights the long gestation period, and doesn’t expect a significant impact in near-term EBITDAR. Latest broker ratings as follows: CSLA: Sell with TP $0.46 CS: U/PF with TP $0.47