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Tigerair revenue growth is strong

Tigerair Australia (formally Tiger Airways) Tuesday reported results for the three months to 30 June. The company declared a revenue of $S21.1 million, a 70% rise on the previous period due to a 68.9% rise in passenger numbers following the opening of new routes. The result implied a small gain in yield (i.e., the revenue from each customer).

The revenue gains resulted in a net operating loss of  $S17 million ($A14.8 million) in the three months to June 30, compared with a $S21 million loss in the previous period.

Following the recent 60% takeover of Tigerair by Virgin Australia (ASX: VAH), Tigerair has started to shift focus from commercial flight routes to leisure routes where price is a stronger deciding factor. It has recent added the Melbourne-Coffs Harbour and Melbourne-Sydney-Alice Springs routes at the expense of routes such as the business-oriented Melbourne-Sydney journey.

The changes are expected to continue under the rebranded airline, with Tigerair Group CEO Koay Peng Yen indicating that the company expects to continue to ‘make enhancements’ in the interest of its major shareholders as fast as possible. The first stages of the transformation have included the rebranding and change in focus to leisure routes, and will include the addition of a 12th plane to the fleet later this year.

Tigerair’s market share is currently at around 4%, indicating significant room to grow for the airline.

Foolish takeaway

Early signs are positive for the Tigerair recovery story under the part ownership of Virgin Australia. With room to grow, risk tolerant investors may choose an investment in Virgin Australia for exposure to the budget airline.

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Motley Fool contributor Andrew Mudie does not own shares of any companies mentioned in this article.

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