Tigerair Australia is on a clear path to profitability by 2016/17 after a year of transformation, the budget carrier’s majority owner Virgin Australia says.
Virgin completed its 60 per cent purchase of Tigerair Australia from Singapore-based Tigerair Holdings, which held onto the remaining 40 per cent, on July 8, 2013.
Since paying $35 million for Tigerair Australia, the low-cost airline has focused on improving custom satisfaction, implementing a new revenue management system, reducing costs through working closer with Virgin and developing its network as part of a transformation program.
However, the low-cost carrier continued its record of having never made a profit in Australia since commencing operations Down Under in 2007, with Virgin recording a $46.1 equity-accounted loss for its 60 per cent share in 2013/14.
Virgin chief executive John Borghetti, who is chairman of the Tigerair Australia board, says Tigerair’s first year under Virgin’s majority ownership was about establishing a platform for profitability.
“The focus over the next three years will be on executing the program and achieving profitability in 2017,” Borghetti said.
“We are very confident of this. The very first year was really about getting the footing correct, particularly after the grounding and the issues that it had. We’ve done that. Now we can move forward with this strategy.”
Virgin said Tigerair Australia, which had a fleet of 13 Airbus A320 aircraft at June 30 2014, carried 3.3 million passengers in 2013/14, an increase of 500,000 from the prior year.
Tigerair Australia and Virgin were also conducting coordinated pricing and joint procurement of fuel purchases, after the budget carrier had previously suffered from a lack of fuel hedging.
“They actually bore the full brunt of the increase in the fuel price and foreign exchange,” Virgin chief financial officer Sankar Narayan said.
Tigerair Australia opened a new Brisbane base in May 2014 with two A320s and resolved a dispute with Sydney Airport over access to departure gates and check-in infrastructure in August.
Borghetti said Tigerair Aystralia had the lowest cost base of Australia’s domestic carriers.
“The cost base of Tiger is such that it can continue to offer good fares,” Borghetti said.