Why exiting Indonesia is a good move for Tigerair

Tigerair Mandala has only a 1-2% market share.

According to OCBC Investment Research, it is positive on a Tigerair Mandala sale.

Here's more:

In 2012, Mandala Airlines (later rebranded TRM) underwent a financial restructuring, during which TR bought a one-third stake. TR's stake was brought up to 35.8% in Sep 2013. Saratoga, an Indonesian PE firm, owns 51% of TRM.

Both Saratoga and TR are reportedly not interested in increasing their investments in TRM.

We would be positive on a TRM sale. The carrier lacks the economies of scale for Indonesian market, which is facing increasing overcapacity.

TRM has only a 1-2% market share, in stark contrast to Lion Air (46%) and Garuda Indonesia (28%), according to CAPA Centre for Aviation. A potential sale is not surprising, given that TR has been reducing its exposure to the other loss-making cubs.

TR sold a 60% stake in Tigerair Australia in Jul 2013 to Virgin Australia and in Jan this year, it entered an agreement to sell its full 40% stake in Tigerair Philippines to Cebu Air, the parent of Cebu Pacific. In an article dated 19 Feb, CAPA reported that TRM is reducing its total number of flights by 42% and more than halving the number of routes being operated (19 at the beginning of the year), by mid-Mar.

CAPA cites TRM CEO Paul Rombeek as saying that on an available seat kilometres (ASK) basis the shrinkage will be 30%.

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