Many choose it when all others are book out or are very expensive to bear. Thus, the biggest challenge Tiger Airways facing today is the loosing customer base. This research will focus on why Tiger is loosing customers. Of the many reasons, unfriendly staffs and ignorance to customer inquiries are causes for Tiger not being able to attract more customers. According to Marketing Magazine, customer satisfaction with Tiger Australia in 2012 June was 64 per cent. Starter’s was 65 per cent, Virgin’s 8 per cent and Santa’ was 80 per cent. Marketing Magazine, June 2012) 2. Financial situation The company has poor history of financial performance.
It is operating in losses for several years except few. The airlines company reported a loss after tax of $118. 5 million, including $88. 3 million in exceptional charges, for the quarter ended 31 December 2013, compared to a profit after tax of $2. 0 million recorded in the previous corresponding quarter (Release 24 January 2014). The company had performed better last year after completing the sale of Tiger Australia shares to Virgin Australia but this positive business outlook did not last for long. The table 1 in appendix shows a brief financial status of the Tiger Airways in the last two fiscal years (Digerati 2013).
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The company’s operating margin (Table 2 in appendix) and BET tells us that the company is actually operating in losses. Asset turn over is less than 1 and ROAR (Table 3 in appendix) is negative which indicates the company has not been able to use its assets to generate profits. Even the company has failed to make any headway on ROE and interest coverage. Negative interest coverage means the financial institutions would not be happy to provide rather loans to the company while negative ROE would incite public not to invest in the company or sell their shares. This would have severe consequences on the financial situation of the company.
The company has problem with cash flow (Chart 1 in appendix). It has not been able to generate enough cash flow to meet the requirements. Failing to generate enough cash flow means Tiger Airways has to depend on loans or equity for the daily cash needs. Equity earnings are spent on servicing the debt. The current and quick ratios show the company is not in a position to pay back its current debt (Chart 2 in appendix). . Positioning of Tiger Airways The company operates in the region where many budget airlines such as Air Asia, Air Indus, Easter Jet, Juju Air, Mini Lankan, Zebu Pacific, IndiGo, Gooier, Cottoned etc.
The increased economic activities in the region have slightly increased the flow of people thereby widening the scope of aviation industry. However, the growth of aviation industry has surpassed the increased need of the business travel and tourism. Further, the increase economic activities means, people look for business flights rather than economy class, which the Tiger Airways has not coked into. The region is very competitive. The Porter’s model describes the five forces of competition, which Tiger is facing. The following figure 1 shows the Porter’s five forces model of competition.
Threat of new entrants substitutes Degree of Rivalry among competitors Bargaining power of supplier customers Figure 3. 1 : Porter’s five forces model Lets draw line to connect this theory with the current situation of Tiger Airlines. Competition in the region where Tiger operates is out stretched. As mentioned above there are so many budget airlines for customers to choose from. Under such resistances, customers have greater bargaining power. Also, the customers have ample 4 substitutes to ignore Tiger because of various reasons including poor customer service.
The other budget airlines have come up with better deal and better services compared to Tiger. These form the substitute for the customers looking for economy class travel. The local agents, the customer supplier for Tiger, also have bargaining space to increase commission. Not immediate but Tiger also faces potential threats of new budget airlines entering the market. It appears but not in entirety that Tiger Airways focuses its policy on providing revise on cheaper rates. Lets see the three generic strategies arising out of the Porter’s five forces model. Narrow (Ta regret market) Broad Figure 3. : Strategies based on Porter’s model Low cost leadership Differentiation stick in middle Focus Cost differentiation (Basis competitive advantage) Tiger Airways is a budget carrier but it has not been able to market its cheap brand successfully. It has heavily depended on Singapore Airlines for marketing and networking. It means, the marketing strategies of the company are not effective. The company failed to position itself as low cost leadership. 5 4. Customer Analysis Tiger Airlines’ customers mostly are from developing countries or from the low and middle class families from developed countries.
The number of people looking for cheap travel has increased since the financial crisis which means Tiger’s market has tactically grown by default. Also many people who have started small business and have trading links to the Asia Pacific region choose Tiger. Customers do not rate Tiger Airways a satisfactory service provider. The company has bad image. The company gets flooded with complaints in their social networking accounts like Faceable and Twitter. The staffs stationed at the customer service department are not helpful to address the queries and complains by the customers (either through phone or in person).
Instead of clarifying matters and executing a good customer relation strategy, Tiger deleted negative comments off their official Faceable page and remained silent for 72 hours after the grounding took place in 2011. The customers of the company also complain about frequent delays and cancellations of the flight. The company appears not serious at addressing these concerns, further aggravating the situation. These are the examples of poor immunization and corporate strategies. All these actions only served to reduce consumer confidence and trust with Tiger. . Internal Business Issues Besides poor customer service, the employees at the Tiger Airways in Australia feel their Job is not secure. When it was grounded in 2011, most employees in Oval and Adelaide, Australia lost their Job without a good compensation. While the business protects of the airlines in Australia is very bleak, Job losses without compensation demoralized the remaining employees as well. Further, grounding gave message to the public that Tiger Airlines is not a safe budget airlines, forcing the public to see alternatives.
The company has poor technical records. Despite warnings and grounds, there hasn’t been improvement in the technical glitches the company have been facing (BBC 23 Feb. 2014). 6. Innovation In February last year, Tiger Airways and its partner airlines Mandela Airlines partnered with Changing Airport Group (CAGE) of Singapore to make hassle-free transfers for passengers at the CAGE without the need for travel visa to enter Singapore, immigration clearance, and the retrieval and checking-in of their luggage a second time for onward flights, branded as Disconnect (CAGE Jan 2013).