http://www.businessspectator.com.au...n-aviation-ACCC-pd20110707-JJ3WC?OpenDocument
Will wounded Tiger beat a retreat?
Stephen Bartholomeusz
Published 12:09 PM, 7 Jul 2011 Last update 12:09 PM, 7 Jul 2011
Singapore Airlines has always presented itself as an arm’s-length, passive investor in Tiger Airways. It would appear that is no longer the case.
The grounding of Tiger’s Australian fleet until at least the end of this month has ignited a flurry of activity within the boardroom of its Singapore parent, culminating in the departure of its Australian chief executive, Crawford Rix, and the appointment of the parent company’s chief executive, Tony Davis, as the local CEO – presumably on the basis that he was responsible for the turmoil and therefore it is up to him to fix it.
Since the crisis in its Australian operation erupted on July 1, when the Civil Aviation Authority instructed Tiger to suspend services because of safety concerns, there have been changes within the Singapore boardroom.
On July 3, in what was the first ominous signal for Davis, the board appointed Chin Yau Seng, a Singapore Airlines executive and former CEO of its SilkAir short haul subsidiary, as an executive director to ‘’work with’’ Davis. Yesterday he became acting CEO.
The board also appointed J.Y. Pillay, a former chairman of Singapore Airlines, as non-executive chairman, displacing Gerard Ee. Pillay is also a very senior member of ’Singapore Inc’: he’s a member of Singapore’s Securities Industry Council, chairman of the Council of Presidential Advisers and a former managing director of Singapore’s Monetary Authority and its Investment Corporation.
Singapore Airlines, which holds just under 33 per cent of Tiger’s capital, and the Singapore government’s investment arm, Temasek Holdings, which controls about 7.5 per cent, would have been embarrassed and aggrieved at the mess Tiger has got itself into in Australia. It appears they have been spurred into taking aggressive action to wrest control of the boardroom and the situation.
Apart from the financial and brand damage Tiger has experienced, Tiger’s inexplicable decision to defy the public warnings of Australian Competition and Consumer Commission chair Graeme Samuel and continue to take bookings, until it finally backed down under duress on Tuesday, would have caused consternation in Singapore, where defiance of government authorities isn’t usual.
Even with Singapore Airlines apparently taking a more assertive role, it isn’t clear how the loss-making Australian operation – which is now losing an estimated $1.6 million a week as a result of the groundings – can be rehabilitated.
Even if it can satisfy CASA and get its planes back into the air, the brand damage – and the Tiger brand wasn’t particularly valued even before the groundings – has been enormous because of the visibility of the safety issues, as well as the massive disruption experienced by its customers.
Qantas, through its Jetstar brand, and Virgin Australia could also be expected to seek to put a lot of pressure on Tiger if it is allowed to resume services, in the knowledge that an already loss-making business will be even more vulnerable in its damaged state. Tiger is likely to need a lot of time and capital if it is to re-establish itself and become a viable competitor in this market.
Tiger’s Asian operations are profitable and growing and it may make more sense for the reshaped board and senior management to abandon the Australian market and redeploy the ten planes in the local fleet elsewhere.
Despite its protestations, the presence of Singapore Airlines on Tiger’s register as its biggest shareholder has always created speculation that it saw Tiger’s entry into the Australian industry as a way of both creating the group's long sought-after access to the Australian domestic market and creating some pressure on its rival, Qantas.
The recently-struck alliance with Virgin Australia, from Singapore’s perspective, serves a similar purpose and may tilt the balance of the decision-making over Tiger’s future in Australia towards a withdrawal.
Will wounded Tiger beat a retreat?
Stephen Bartholomeusz
Published 12:09 PM, 7 Jul 2011 Last update 12:09 PM, 7 Jul 2011
Singapore Airlines has always presented itself as an arm’s-length, passive investor in Tiger Airways. It would appear that is no longer the case.
The grounding of Tiger’s Australian fleet until at least the end of this month has ignited a flurry of activity within the boardroom of its Singapore parent, culminating in the departure of its Australian chief executive, Crawford Rix, and the appointment of the parent company’s chief executive, Tony Davis, as the local CEO – presumably on the basis that he was responsible for the turmoil and therefore it is up to him to fix it.
Since the crisis in its Australian operation erupted on July 1, when the Civil Aviation Authority instructed Tiger to suspend services because of safety concerns, there have been changes within the Singapore boardroom.
On July 3, in what was the first ominous signal for Davis, the board appointed Chin Yau Seng, a Singapore Airlines executive and former CEO of its SilkAir short haul subsidiary, as an executive director to ‘’work with’’ Davis. Yesterday he became acting CEO.
The board also appointed J.Y. Pillay, a former chairman of Singapore Airlines, as non-executive chairman, displacing Gerard Ee. Pillay is also a very senior member of ’Singapore Inc’: he’s a member of Singapore’s Securities Industry Council, chairman of the Council of Presidential Advisers and a former managing director of Singapore’s Monetary Authority and its Investment Corporation.
Singapore Airlines, which holds just under 33 per cent of Tiger’s capital, and the Singapore government’s investment arm, Temasek Holdings, which controls about 7.5 per cent, would have been embarrassed and aggrieved at the mess Tiger has got itself into in Australia. It appears they have been spurred into taking aggressive action to wrest control of the boardroom and the situation.
Apart from the financial and brand damage Tiger has experienced, Tiger’s inexplicable decision to defy the public warnings of Australian Competition and Consumer Commission chair Graeme Samuel and continue to take bookings, until it finally backed down under duress on Tuesday, would have caused consternation in Singapore, where defiance of government authorities isn’t usual.
Even with Singapore Airlines apparently taking a more assertive role, it isn’t clear how the loss-making Australian operation – which is now losing an estimated $1.6 million a week as a result of the groundings – can be rehabilitated.
Even if it can satisfy CASA and get its planes back into the air, the brand damage – and the Tiger brand wasn’t particularly valued even before the groundings – has been enormous because of the visibility of the safety issues, as well as the massive disruption experienced by its customers.
Qantas, through its Jetstar brand, and Virgin Australia could also be expected to seek to put a lot of pressure on Tiger if it is allowed to resume services, in the knowledge that an already loss-making business will be even more vulnerable in its damaged state. Tiger is likely to need a lot of time and capital if it is to re-establish itself and become a viable competitor in this market.
Tiger’s Asian operations are profitable and growing and it may make more sense for the reshaped board and senior management to abandon the Australian market and redeploy the ten planes in the local fleet elsewhere.
Despite its protestations, the presence of Singapore Airlines on Tiger’s register as its biggest shareholder has always created speculation that it saw Tiger’s entry into the Australian industry as a way of both creating the group's long sought-after access to the Australian domestic market and creating some pressure on its rival, Qantas.
The recently-struck alliance with Virgin Australia, from Singapore’s perspective, serves a similar purpose and may tilt the balance of the decision-making over Tiger’s future in Australia towards a withdrawal.
