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Tiger Airways

If Tiger quits, domestic fares will soar - analysts

May 30, 2011

If the budget airline Tiger Airways quit the Australian aviation market domestic fares could rise by as much as 15 per cent, analysts estimate.

Tiger this month suspended its ambitious growth plans for Australia and announced a strategic network review that could result in it ditching loss-making routes.

The airline, which was issued a ''show-cause'' notice by the air regulator in March, has insisted that it has no plans to pull out of Australia despite mounting losses. The notice was sparked by concerns about aircraft maintenance and forces Tiger to explain to authorities why it should not have its licence to fly revoked.

Advertisement: Story continues below Reassurances about its commitment to Australia have not stopped Goldman Sachs analysts publishing a report about the impact a withdrawal would have on leisure fares, industry competition and airports.

The analysts said fares could rise by about 15 per cent because Tiger had been one of the main reasons prices had fallen in real terms over the past three years.

''We would expect that … Jetstar and Virgin would raise airfares in response to a reduction in the competitive pressures that have driven domestic real airfares to their all-time low,'' they said.

''Based on this, if Tiger exits the market and … prices return to pre-2008 levels, arguably domestic passenger numbers could drop by about 5 per cent.''

The analysts said Gold Coast's airport would be the hardest hit by Tiger quitting Australia because of its reliance on leisure travellers, and Tullamarine Airport in Melbourne would suffer, given that it is the budget airline's Australian base. Tiger has a 6 per cent share of domestic travel.

Tiger reiterated yesterday that it was committed to keeping its operations in Australia, and it dismissed speculation that it would abandon its second Victorian base at Avalon Airport, near Geelong.

''We have no plans to close down Avalon,'' a Tiger spokeswoman said.

If Tiger quits, domestic fares will soar - analysts
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