Australian Tiger feels (another) squeeze.

Australia's Singapore-owned Tiger is feeling the squeeze,-and not only from the aeronautical authorities as previously noted.

The Singapore parent has now announced that following the loss of S$9 million in the year to March this subsidiary will not grow capacity this year and two of its ten A320s will return north where they can reinforce the group's South East Asia operations.

This will place Tiger Australia in a very difficult position for a small low cost/low fare operator up against three big domestic competitors. Jetstar, Virgin Australia and Qantas all offer a wider range of routes and much higher frequencies between almost any city pairs Tiger might be interested in. With much larger fleets they can also respond much better to any schedule disruptions or unserviceabilities whereas Tiger is much more easily forced into the sort of cancellations or long delays which hit its market reputation and competitive position. In a static state that leaves it with pretty much the only option being to cut fares/yields further to cling on to market share and keep its paws in the door. From there the obvious risk is of a vicious spiral. The freeze on capacity for the coming year can't be exciting for Tiger since to claw back that S$ 9 million it has both to cut costs further and to get yields and passenger numbers up. Not easy when you are a small fish without the economies of scale and reserve capacity available to the three big ones.

Any operator in this position must see two options. One is to invest a lot more, add a large number of additional aircraft and up the frequencies to give the big boys a proper run for their money. The outlay would be huge. The other is to conclude that particularly in a constrained market the investment and risk are just too great and either get rid of this part of the business or move it elsewhere. Tiger's Australian managment have a tough job on their hands to get rid of a furrowing of brows in Singapore.

Footnote: Qantas has much for which to thank the low cost carriers. Apart from revitalising and stimulating the market, especially domestics, they have given the very substantially unionised and traditionally organised legacy airline a cover to enable it to carry out substantial changes and outsourcing as well as to enable it to set up its own lower cost airline ,Jetstar. All this has given it a new life on routes which would be uneconomic under its previous labour agreements and formulae.