By Cheranka Mendis
Singapore’s leading low-cost carrier Tiger Airways has decided to terminate operations in Sri Lanka from September, a year after its launch.
Citing commercial reasons, the airline has made the decision three weeks ago and has already started conferring with customers that have booked for the period after.
MAC Aviation Services Ltd., the General Sales Agent for Tiger Airways, noted that there would be no flights from Sri Lanka after 30 August. A total of 700 passengers have made bookings for the period between August and December 2013.
MAC Holdings Aviation Division General Manager Thisum Jayasuriya told the Daily FT that the key reason for pulling out was the yield.
Even though flights from Sri Lanka were full, money gained per person was not viable for the airline to operate further, he said.
Having launched on 31 May last year with much fanfare, the airline operates four flights a week and has transported approximately 35,000-40,000 passengers within the year. From Colombo key destinations for Tiger Airways are Singapore, Malaysia, Australia, Bali and Indonesia.
“In terms of the numbers, we have achieved our targets,” Jayasuriya said. “The carriers are 180 seaters and comes half full from other destinations. We only have to fill 50-60% of the aircraft, which we have done successfully.”
With the 80-85% load factor the carrier runs on, the airlines should ideally be able to breakeven and make profit. However, two key reasons prevent this, he said. “This is a price sensitive market. Major airlines such as Cathay Pacific, Emirates and Singapore Airlines, etc. are selling low cost fares in this market, over and above the onward passengers and cargo handling. This makes it hard for budget carriers to operate.”
The Sri Lankan aviation system currently has no concessions for low-cost airlines, which also makes it harder for those carriers to compete among the bigger names, he said. Mentioning this as the second reason, Jayasuriya noted that airport and aviation ground handling charges were the same for all airlines. “Right now it is not viable for low-cost airlines to operate from Sri Lanka. I believe these were the same reasons for AirAsia to pull out as well.”
Low-cost airlines currently in Sri Lanka include Air Arabia, flydubai, SpiceJet, Air India Express and the State-owned budget carrier Mihin Lanka.
Jayasuriya said: “If the Government can come up with a system that considers giving concessions for budget carriers, it will encourage those present to stay on as well as lure in other names to come in and serve our market.”
For those who have pre-booked for the months after August, Tiger Airways has decided to give a full refund to passengers, or if they wish, they could even change the ticket and bring it forward to a date before the termination of services with no additional chargers.
Tiger Airways operates a unique low-cost business model that involves removing non-essential costs, ensuring that customers pay only for what they actually need, while maintaining the highest standard of safety, security and punctuality.
One of Asia’s leading low-cost carriers, Tiger Airways aims to build its fleet to 68 aircraft by December 2015. Operating from Singapore and Australia, Tiger Airways’ network extends to over 30 destinations across 12 countries in the Asia Pacific region.