Tigerair

Tigerair: For Singapore operations, Aug’14 saw 3.9% y/y increase in traffic, while capacity decreased by 1.8%. Consequently passenger load factor (PLF) increased by 4.6ppt to 83.1%. MS believes that demand-supply dynamics should improve if Tiger maintains capacity discipline going forward. Channel checks indicate that Tiger is not going to grow capacity from FY2014, suggesting further capacity cuts in coming months. Tigerair should be able to narrow operating losses on the back of PLF improvement in recent months as the seasonally strong 4Q14 approaches. Meanwhile collaboration with Scoot could lead to stronger yield support and traffic feed through from Scoot’s growing network. However, Tiger’s balance sheet strength continues to deteriorate amid consecutive quarters of losses, tereby increasing balance sheet risks. MS has an Equal Weight rating on Tigerair with a TP of $0.45