(TVLW) – Tiger Airways Pte, the budget carrier partly owned by Singapore Airlines Ltd., ordered 20 planes valued at $1.3 billion from Airbus SAS as it sets up a base in South Korea and expands in Australia, Malaysia and India.
Tiger Air is converting options for A320 planes that were part of an order pledged in June, Chief Executive Officer Tony Davis told reporters in Singapore today. The airline expects to finish taking delivery of the new single-aisle planes by 2016, when it will have a fleet of 70 planes.
The deal will boost Tiger Air’s total orders to 66, helping the airline counter growing competition in the region. AirAsia Bhd., Southeast Asia’s biggest discount carrier, and Indonesia’s PT Lion Mentari both have more than 100 planes on order as economic growth and liberalization boost air travel.
“Tiger Air is too small at the moment and there’s hardly any room for them to grow,” said Raymond Yap, a Kuala Lumpur- based analyst at CIMB Investment Bank Bhd. “There’s probably more demand going forward if the regulations permit.”
A fully liberalized Asian air-travel market could generate as many as 1,600 low-cost routes by 2015, according to Airbus. Asia’s budget airlines will have a combined fleet of 1,300 single-aisle aircraft by 2025 compared with 236 planes now, according to the world’s largest maker of commercial aircraft.
Davis, 42, who set up British Midland Airways Ltd.’s low- cost unit, wants to build the fleet to support a network covering India, Australia and South Korea. Tiger Air operates 12 A320s and flies to more than 25 destinations.
Tiger Air, which added the Indian cities of Chennai and Kochi to its network in October, plans to start services to Bangalore next year, Davis said today.
The airline said it filled an average of 91 percent of its seats in the first week of operations in Australia, where it began offering domestic services in November. It operates four aircraft from its headquarters in Melbourne and will pick a second base next year.
Its South Korean affiliate, a venture with Incheon’s city government, may start as early as the end of 2008. The carrier plans to pick its next base in Asia by the end of 2009 or early 2010, Davis said.
The airline also won approval to start flights between Singapore and Kuala Lumpur from February 2008, challenging the three-decade-long dominance of Singapore Air and Malaysian Airline System Bhd. on the route.
“We are ready to start services on Feb. 1 provided all the administrative issues are completed before that day,” Davis said, adding the carrier also plans to serve cities such as Kuching, in eastern Malaysia, when air restrictions are lifted.
The 10-member Association of Southeast Asian Nations has pledged to remove air restrictions between their capital cities by December 2008 and to fully liberalize aviation services in the region by 2015.
Economic expansion and rising incomes have made air travel affordable to more people, prompting carriers to expand capacity. Growth in Asia-Pacific passenger traffic is estimated to outpace the global average, according to the International Air Transport Association, which represents more than 250 airlines.
Tiger Air, set for its first year of profitability since it started, said initial deposits for the aircraft will be paid for using the company’s “own cash reserves,” without the need to ask for funds from its shareholders.
The low-cost airline, which has funded previous purchases through sale-and-leaseback agreements, may seek financing for planes set for delivery in 2010.
“As we grow the business, the next wave of aircraft that we take delivery of in 2010, we will start financing some of those aircraft ourselves,” Davis said.
Tiger Air last agreed to buy planes in June, when it made a pledge for 30 A320s. Malaysia’s AirAsia has ordered a total of 175 A320s, while Lion Mentari, Indonesia’s biggest budget carrier, has signed up for 122 of Boeing Co.’s 737-900ER planes.
The A320 family competes with Boeing’s 737s in the market for single-aisle aircraft. Toulouse, France-based Airbus has won 706 orders for the A320 this year as of the end of November, according to its Web site. Chicago-based Boeing won 638 orders for the 737 in the same period, its Web site said.
Tiger Air, the first to fly from Singapore’s budget terminal, operates a single-class service, with customers paying more for food and extra baggage.
The airline was established in December 2003 and began flying in September the following year. Singapore Air owns 49 percent of the carrier, while Temasek Holdings Pte, Singapore’s state-owned investment company, holds 11 percent.