Tiger Airways Holdings, the budget carrier part-owned by Singapore Airlines., is selling as much as $273 million of shares in the largest initial public offering by an Asian carrier in five years.

 

The airline, with operations in Singapore and Australia, and a shareholder will sell combined about 165.2 million shares for as much as $1.65 apiece, it said in a prospectus filed with the Monetary Authority of Singapore today. The shares are expected to begin trading in the city-state on Jan. 22.

 

Chief Executive Officer Tony Davis will use the IPO’s $247 million net proceeds to help pay for US$4.8 billion ($6.7 billion) of new planes to take on rivals AirAsia and Australia’s Jetstar Airways, who formed an alliance this month to cut costs. Tiger Air is expanding as air travel demand gathers pace amid a rebound in global economies following the worst recession in six decades.

 

“This seems to be a better time to do the IPO because the market is now more open to a recovery play than a couple of months ago,” said K. Ajith, an analyst at UOB Kay Hian Research in Singapore. “The question is whether the growth in air traffic can be sustained.”

 

Singapore Air and Temasek Holdings, which currently hold 49% and 11% of Tiger Air respectively, won’t sell or buy any shares in the IPO for 12 months. Indigo Partners LLC, Tiger Air’s second-biggest shareholder with a 24% stake, will sell 9.6 million shares, the filing said.

 

RyanAsia, which has a 16% stake in Tiger Air, may sell 19.8 million shares if a so-called over-allotment option is exercised.

 

As well as helping to finance new planes and repay loans, a portion of the funds may be used to set up a new airline or new operating bases, according to today’s filing.

 

Davis today denied reports the airline had to scale back the size of its IPO. The carrier more than halved its offering as “sentiment on the airline industry remains fragile,” Shukor Yusof, Standard & Poor’s Singapore-based editorial director, wrote in a Jan. 5 note.

 

“The offer is what the company had always proposed,” Davis said in a conference call today. The airline is “confident” the amount of funds it’s raising is enough to fund the proposals for expansion, Davis said.

 

Discount airlines are gaining market share from flag carriers in Asia as they add capacity and lure travelers with cheap tickets. Low-fare airlines accounted for about 20% of passenger traffic at Singapore’s Changi Airport in October, compared with 3% in 2004, according to figures from the city’s main airfield.

 

Davis, who set up BMI’s low-cost unit, has ordered a total of 66 Airbus SAS A320s, 12 of which have been delivered, according to the planemaker’s Web site. Tiger Air plans to boost its fleet to 68 aircraft by 2015, from the current 17, according to its preliminary filing in December. Two more will join the fleet by March, Davis said.

 

The budget carrier, which has funded past aircraft purchases through so-called sale and lease-back arrangements, yesterday obtained financing for the prepayment of five planes it plans to receive earlier than scheduled. This month, it also secured funds for two planes from an export credit agency.

 

Tiger Air posted a net loss of $8.3 million in the six months ended September, adding to the $50.8 million of losses it racked up for the year ended March 2009, its preliminary filing in December said.

 

The carrier, seeking to emulate the success of discount carriers such as Ryanair Holdings Plc, started operations from its base in Singapore in 2004 and became profitable in the year ending March 2008. In Nov. 2007, the company started operations in Australia, with hubs in Melbourne and Adelaide.

 

Citigroup Inc., Morgan Stanley and DBS Group Holdings have been mandated to manage the sale.

 

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