Check out why Tiger Singapore's terminal shift is a really bad move

Tiger Singapore's load factor crashed at 79%.

According to DBS, Tiger Singapore saw load factors and passenger carriage dip during the month. Though the month is a seasonally low period, a passenger carriage dip of 7% m-o-m to 588m p-km was below expectations. Load factor at 79% also dipped below 80% for the first time in 6 months.

Here's more from DBS:

On a y-o-y basis, load factor stayed flat, but recall that Tiger Singapore was struggling with excess capacity in the prior year period owing to the events in Australia. We believe the move from Budget Terminal to Terminal 2 in Singapore on September 23rd may have deterred some passengers from booking flights close to that period, as there could be some teething problems/ delays expected in the first few days following the move.

At the Australian operations, passenger carriage (RPK) increased 10% m-o-m to 262m p-km, as more sectors were introduced during the month, which is part of the ramp up to pre-grounding scale. Load factors stayed robust at 84% for the month.

From October onwards, it is expected that Tiger will be flying about 64 sectors per day, and it should be able to benefit from peak holiday season demand. New routes to be launched include Melbourne - Adelaide, Melbourne - Hobart and Melbourne - Mackay, among others.

Overall passenger carriage for 2Q-FY13 (July to September period) for the Group thus came in at 2591m p-km, about 2% below our forecast for the quarter. This will likely mean that losses for the quarter will likely be higher than we had earlier estimated.

While that could affect near term sentiment, the turnaround story for Tiger, premised on improvements in Australian operations, still remains largely intact. Maintain BUY and S$0.90 TP. Key risks to our call include high jet fuel prices and potential yield compression in Australia owing to increasing competition.

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