Low cost #airline #Tiger Airways plans rights issue

Singapore based low cost airline Tiger Airways has cast its eyes on the $158.6 million rights issue to raise funds to indulge in a flying spree by adding to its aircraft purchases and to boost its destitute balance sheet. The low cost airline is recovering from losses incurred due to its Australian operation which had been suspended for six weeks for safety concerns. The LCC suffered losses of around S$2 million per week while its flights were grounded.

After Australian regulators lifted the suspension, the low cost airline came up with the strategic decision to raise funds through rights issue to fortify its balance sheet by increasing equity, thereby reducing dependence on debt financing and providing the company with financial tractability to fund its expansion plans.

The low cost airline said it plans to offer one rights share for every two shares held by its investors, totaling 273.4 million new shares at an almost 39% discounted price. The major shareholders of the LCC Singapore Airlines (SIA) and Temasek Holdings, who collectively hold 40.2% of the carrier, will be subscribing to the rights issue and have also committed to underwrite 90% of the sale.

It can be observed that, one of the two major shareholder, SIA’s recent decision to launch a 100% owned medium-to-long-haul budget airline and Tiger Australia’s issues, it could potentially take on a more active role in driving Tiger’s strategies heading forth.

How will the gamble by Tiger Airways pay off in the end? To know more about the strategies of low cost airlines visit Low Cost Airlines Congress 2011.