Tiger Air: Thai Airways Chairman said his company will not extend its budget airline contract with Tiger, effectively terminating their alliance. The MOU btwn the two airlines officially expires next month.
He said its planned new regional airline, ThaiSmile, would help replace the alliance with Tiger. ThaiSmile plans to launch from July next year to tap strong demand for air traffic in Asia and win back market share in the wake of fierce competition in the region.
The new airline would fly to domestic cities in the first year of operations before expanding destinations into SE Asian countries, as well as China and India in 2013, when it expects to make profit.
Nevertheless, Tiger does not seem to know that it might have been dumped. In response to the news, Tiger says “there's no change in the status of the project. Discussions on the project will continue.” To add insult to injury, signs that Tiger was being cuckolded had been present for months. Thai Air’s top mgt has been continually signaling that it would form its own budget carrier.
With an upcoming new airline in the same budget space, expect increased competition for Tiger, as the airline grapples with its own problems in Australia.
Stock trades at 3.0 P/B, vs larger peer AirAsia at 2.4x P/B.
The majority of Street rates at Sell with TP $ 0.54 – 0.91.
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