Last night both Tiger Airways and SIA’s Scoot announced they are in partnership to offer single-ticket itineraries out of Australia and, subsequently, for inbound to Australia.
The partnership will be carried out in two phases.
Initially, passengers from Scoot Australia would be able to book flights to routes operated by Tiger Singapore and later on Tiger Singapore’s passengers would be able to purchase flights to various Australian destinations operated by Scoot.
At present, Tiger just operates the Singapore-Perth route and flights domestically within Australia. We view the news positively as this will increase
traffic flow to Tiger Airways. However we believe that any earnings impact will be minimal at this point in time as the rise in load factor will be offset by lower yield assumptions on short term competitive pressures.
Our earnings remain largely intact with our TP raised marginally from S$0.75 to S$0.76, still pegged to 2.5x FY13F P/B. Given that our TP has been hit, we are downgrading the stock to a Neutral.
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