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Cost Containment Crucial - Tiger Airways

(KUALA LUMPUR: 06 December 2005) Tony Davis, CEO of the Singapore-based LCC, Tiger Airways, stated that airline industry’s cost base clearly unsustainable and it must learn strategies from other industries to contain costs.

“We don’t look to Cathay or British Airways for inspiration, we look to Amazon.com”, said Mr David, speaking on a panel at the Centre for Asia Pacific Aviation’s Outlook Summit in Kuala Lumpur. “We – the aviation business – created a cost base that was unsustainable,” he said.

As a consequence, Mr Davis has made cost containment the Singapore Airlines-backed carrier’s biggest priority. This focus is a major reason Tiger was recently recognised for having the highest aircraft utilisation rates in the world – at 14 hours a day. This allows the one year-old carrier to serve 14 destinations with only four A320s.

“The key to profitability is a radical restructuring of how carriers acquire and pay for distribution, labour and infrastructure”, he said.

Also addressing the gathered aviation leaders was the panel’s moderator, The Centre’s CEO, Andrew Miller, who said that flag carriers faced with low cost incursion will necessarily face lowered yields, making the creation of a low cost affiliate a logical response.

Mr Miller outlined how carriers who take this step will be pleased to find that they can match 50% of the cost reduction of the low cost competition just by taking the painless steps of increasing aircraft utilisation and seat density. “The one thing they cannot do, is nothing”, said Mr Miller, who leads the Centre’s airline restructuring activity.

Outlook 2006 is the Centre’s annual review of prospects for the Asia Pacific and Middle East airline industry. This year, the event is focusing on the issues of revenue maximisation and cost reduction, with a special section examining the role of government. Convening in the Malaysian capital, Outlook 2006 has brought together leaders from the extended region’s key stakeholders, representing every segment of the aviation arena, including airports, regulatory bodies and airlines, with both full service and low cost carriers participating.

The Centre for Asia Pacific Aviation, is the region’s leading independent air transport advisory group. With offices in New Delhi, Singapore, Geneva, Vancouver and the UK, the Centre remains at the forefront of the Asia Pacific and Middle East low cost movement, having advised numerous carriers on how to launch independent or affiliated budget airlines, as well as advising major airlines on restructuring exercises.

The Centre is also the region’s pre-eminent publisher of aviation-related information and data, with regular newsletters and reports, including such acclaimed publications as the monthly strategy report Aviation Analyst-Asia Pacific, and Peanuts!, its weekly look at the global low cost sector. The daily publication, Asia Pacific Airline Daily, summarises and analyses the sector’s vital issues.

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