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Tiger Airways shares plunge

Tiger Airways shares nosedived on the Singapore Exchange on Monday after Australia’s Civil Aviation Safety Authority (CASA) grounded the airline’s local fleet until July 9 due to safety concerns.

Investors unloaded their shares despite the airline saying it remained committed to the Australian market in the long term.

At least five analysts — from CIMB, Citi, CLSA, Credit Suisse and Phillip Securities — have cut their ratings to sell following the announcement.

Tiger’s share price plunged 16 per cent or 19 cents to close at S$1.

Market players blame poor investors’ sentiment due to the grounding, which came after two Tiger flights approached airports at below a safe altitude.

This was further compounded by a previous “show cause” warning which reportedly highlight issues in pilot training and aircraft maintenance.

Some industry observers said they believe the ban will be extended further after July 9.

Aviation Week asia editor Leithen Francis said: “I think the stock price could go down even further.

“What could happen this week is CASA could go to the federal court of Australia to seek an extension of that grounding, and I think there’s quite a strong probability that it will happen.

“I think CASA could extend the grounding further because it is going to be difficult to resolve all of these issues within one week”.

CASA can only ground an airline for five working days, and must approach the federal court if it wants to extend the grounding any longer.

The suspension is expected to cost the carrier an estimated S$2 million a week, and analysts said the airline could not sustain such losses indefinitely.

But the airline said it is working with the Australian regulators to address their concerns.

In addition, it has also sent its chief executive Tony Davis to Australia to focus on returning the airline to service.

Meanwhile, Chin Yau Seng, previously CEO of Singapore Airlines’ fully-owned regional arm SilkAir, has been appointed as a new executive director of Tiger.

Still, one analyst has taken that as a positive sign and remains bullish on the airline.

Stephenson Harwood global head of aviation partner Paul Ng said: “If you look at last year’s published results of the group, Tiger Australia was actually a loss-making component of the overall group.

“So the fact that it is currently sort of ceased operations, arguably the effect on the overall performance of the group may be quite minimal.

“So the market sentiment may be a bit exaggerated on the negative end”.

Overall, analysts remain mixed on whether Tiger will clip their wings and exit the Australian market altogether.

Credit Suisse has said Tiger’s days could be numbered, potentially to the benefit of Qantas and Virgin Australia whose shares respectively rose 6.5 per cent to AUD$1.97, and 10.5 per cent to 31.5 Australian cents, following Tiger’s woes.

Citigroup analyst Rigan Wong said in a note that “Tiger pulling out of Australia to cut losses is a possible option,” but added, “further developments beyond this week is anyone’s guess”.

But others said that is not likely, given the difficulties Tiger had gone through to secure the route in the first place.

Frost & Sullivan aviation analyst Julius Yeo said: “I don’t think they will exit, because to secure the permission to fly over the country is quite hard, so they wont give up this route”.

Tiger has said it is aiming to resume services as soon as possible, and its Singapore operations are not affected.

Singapore Airlines (SIA) owns about a third of the budget carrier but is not involved in its operation, while Singapore state investor Temasek owns another eight per cent.

SIA had shrugged the news off, with its share prices closing on Monday up two cents to S$14.22.

Adapted from CNA.

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