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Jakarta Post

Saratoga to keep Mandala flying

  • The Jakarta Post

    The Jakarta Post

  /   Tue, March 4, 2014   /  12:02 pm

Saratoga Capital, the majority shareholder of budget airline Tigerair Mandala, said it would continue to support the operations of the low-cost carrier, despite reports that its Singaporean partner, Tiger Airways, planned to quit the joint venture.

Sandiaga S. Uno, a founding partner of the equity firm Saratoga, said the group would maintain its commitment to keeping the low-cost carrier running.

'€œWe are confident about the performance of Mandala'€™s management team,'€ Sandiaga told The Jakarta Post on Monday.

Sandiaga, however, did not elaborate or comment on the Tiger Airways'€™ decision to withdraw.

Reuters reported Monday that Tiger Airways aimed to sell or close its Indonesian joint venture unless there were signs of a turnaround this year, according to people familiar with the matter.

Mandala Airlines ceased operations in 2011 after it was suspended by the Indonesian government due to debts totaling Rp 2.45 trillion (US$211.08 million).

Mandala took to the skies again in 2012 under the new name, Tigerair Mandala, after financial restructuring in which Tiger bought a one-third stake, which was eventually increased to 35.8 percent in September 2013.

It has since adopted the Singapore-based airline'€™s business model.

Nevertheless, Tiger lost nearly S$40 million ($31.6 million) in the venture in April-December last year, according to Reuters.

Tiger and Saratoga, which owns 51 percent of the venture, are now unwilling to invest further, said a few people who did not want to be identified as they were not authorized to speak publicly on the matter.

'€œThe writing is on the wall,'€ said one company source.

Last month, Tigerair Mandala suspended nine routes or 40 percent of its capacity in a market where larger competitors, such as budget carrier Lion Air and state-run Garuda Indonesia, are adding planes and serving more destinations across the archipelago.

'€œThe more it flies, the more money it loses, as nearly every route is below breakeven,'€ said one of the sources, referring to Tigerair Mandala. '€œTiger is sub-scale in Indonesia. Either it gets out altogether or it grows out of trouble.'€

A spokesman for Tigerair Mandala said both Tiger and Saratoga were committed to supporting the company '€œfor a long period to ensure business sustainability'€.

Tiger Airways, around 40 percent of which is owned by Singapore Airlines Ltd., did not respond to queries from Reuters.

Tiger will be facing its second exit this year if it sells or closes Tigerair Mandala, after agreeing in January to sell its loss-incurring Philippine business to Cebu Pacific'€™s parent company, Cebu Air Inc.

Tigerair Mandala cut back on some of its flights because of soaring fuel costs in early February, affecting 11 of its 20 routes, including the suspension of all its Jakarta-Surabaya flights.

The Jakarta-Surabaya route is one of the busiest and mostly fiercely fought-over routes among budget airlines.

Also affected were services between Jakarta and Hong Kong, which would decrease from five to four flights a week, and between Jakarta and Pekanbaru, from twice to once a day, the airline'€™s spokesman, Lucas Suryanata, said last month.

The recent hikes in aviation fuel prices and the depreciating rupiah are hurting most budget airlines.

'€” JP/Anggi M. Lubis

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