The morning after: Tigerair faces turbulence after Mandala shutdown

Will the desperate turnaround strategy work?

It has been a disappointing end for yet another one of Tigarair’s investments, and its regional ambitions have come to a brutal halt.

According to DBS, Tigerair Mandala’s closure will cripple the already struggling airline by slashing its exposure to one of the biggest markets in the region.

The report further noted that while Mandala’s closure will save Tigerair from sustaining further losses, the airline will still be bogged down by winding costs related to the sudden shutdown.

Here’s more from DBS:

In line with desperate turnaround strategy. As part of its attempts to rationalise capacity amidst a difficult operating environment in the region, Tigerair had earlier announced that it would be grounding almost half of Tigerair Mandala's fleet in FY15 (Mar FYE), while considering various options for the airline.

But it seems now that Tigerair, along with its other partners in Mandala, has concluded that Mandala would not be able to sustain its operations and neither was it able to sell the airline to a
competitor, as some press reports in the past had indicated.

Regional ambitions cut short. We reckon this is a disappointing end to another of Tigerair's investments, following the exit from Philippines and the partial exit from Australia.

The remaining four aircraft in Tigerair Mandala have to be grounded as well, or sublet or returned to lessors, which will require additional one-off provisions and impairments in upcoming results. The airline will have to bear winding down costs as well. However, continuing losses at Mandala have now been avoided and our full-year loss estimate from associates may not be impacted much.