Competition is set to increase in Asia's airline industry with Singapore's Tiger Airways Holdings about to undergo its biggest expansion.

It is hard enough to run one successful airline, but Tiger is trying to build three low-cost carriers in Asia at the same time. The group already operates Tiger Airways in Australia and Singapore and is about to buy into and relaunch Filipino carrier Seair and Indonesian carrier Mandala Airlines. It is also working to establish Thai-Tiger, a Bangkok-based joint venture with Thai Airways International.

“We can't control the time line,” says Tiger Airways Holdings CEO Tony Davis, adding that in Europe or the U.S. one could wait to execute one airline deal at a time, but in Asia this approach would fail. Davis says there is no certainty in Asia when regulatory approvals will be forthcoming, so it is better to start the approval process as soon as possible.

The push to establish overseas joint ventures is part of Davis's strategy to “build a franchise” and make Tiger a truly pan-Asian, multinational carrier. “We're not trying to establish multiple airlines, but multiple local operators of one airline,” says Davis. Some airline functions are to be carried out at a local level, he says, whereas others are to be handled centrally.

“Operational AOC [air operator certificate] functions have to be done locally and need local expertise,” says Davis. But other functions, such as research and development, brand management and aircraft procurement, can be handled centrally.

Davis says Mandala Airlines, Seair and Thai-Tiger will adopt the Tiger Airways business model and draw on group resources. To ensure consistency in branding and save money on marketing, one would normally have just one brand across the group. But local political sensitivities and the need to be perceived in each market as a local brand may make that strategy impossible.

“I think we can have businesses in the group that operate under different trading names,” says Davis. “It seems with Seair that approach works. We would like all the airlines to operate under a common brand, but we have to be pragmatic.”

Malaysia-based AirAsia and Qantas group budget carrier Jetstar Airways are similarly trying to build a franchised airline with operators in different Asian countries using the same brand as much as possible.

Tiger's latest expansion pits it against AirAsia, Indonesia's Lion Air and the Philippines' duopoly of Cebu Pacific Air and Philippine Airlines.

Thailand's volatile political situation has dealt a blow to Tiger's efforts to establish a low-cost carrier in that market. Thai Transport Minister Sophon Zarum has said he opposes the plan because he is concerned that Thai-Tiger will be foreign-controlled. Since Sophon made those remarks, the Thai-Tiger venture has been caught up in regulatory red tape, much to the annoyance of Thai Airways President Piyasvasti Amranand, who notes that Thai Airways will control Thai-Tiger, thanks to a 51% shareholding. Government approval of Thai-Tiger will depend on whether Sophon remains the transport minister after Thailand's national elections July 3.

Tiger's move into the Philippines is more advanced. It has a marketing tie-up with Seair, which leases two Airbus A319s from Tiger, and the Singapore-based airline group has agreed to buy a 32.5% stake for $6 million from Seair's owners. Tiger is doing the due diligence and expects to conclude the deal in the coming weeks. Davis says Seair is the Philippines' second-oldest carrier and is valuable because it is one of only a handful of airlines that have a Philippine congressional franchise. This means Seair is entitled to tax benefits, such as duty-free importation of capital equipment, and can get bank loans more readily.

Davis says Tiger is very familiar with Seair's management. It has taken five years for the two carriers to reach this stage—earlier efforts to bring them together were blocked by the Philippine civil aeronautics board following pressure from Cebu Pacific and Philippine Airlines, which are controlled by Lance Gokongwei and Lucio Tan, respectively, two of the country's wealthiest and most politically connected businessmen. Despite the lobbying, the board last year granted Seair permission to lease aircraft from Tiger and sell tickets through Tiger's website.

Davis says there is no need for Tiger to gain foreign investment approval, because it is buying less than 40%. He refuses to comment on what will happen to Seair's Dornier 328 turboprop operation, but it is understood there is a plan to spin off the turboprop business into a new company, leaving Seair to be purely a low-cost carrier operating Airbus A320-family aircraft. Tiger is buying its stake from Seair founders Nick Gitsis and Irene Dornier, who will together retain a 7.5% stake, says Davis, adding that he wants the founders to remain involved and have an economic interest in the business.

When asked how Seair can expect to prosper when it is competing against two larger airlines controlled by wealthy and politically connected Filipino businessmen, Davis says the local ownership of Seair will be changing and “this will address some of those issues.” He declines to name the new local investors but says an announcement will be made soon. The current local owners are a group led by a relatively low-profile businessman, Tomas Lopez, Jr.

And in Indonesia, Tiger appears to have found a strong local partner for Mandala Airlines, the grounded Indonesian carrier of which it plans to buy 33%, and it will restart the airline this year. Its partner, with 51%, is Indonesian investment firm Saratoga Group, which is controlled by Edwin Soeryadjaya. Garuda Indonesia President Emirsyah Satar describes Soeryadjaya as a friend. “We sit on a lot of the same association boards,” says Satar. “Edwin is a private equity investor who buys failed businesses, fixes them and then sells them at a profit.”

U.S. aviation investment firm Indigo Partners and Indonesian holding company Cardig International owned Mandala before the airline's bankruptcy in January. Cardig has aviation-related businesses such as airport ground-handling company JAS Services. Indigo also helped to found Tiger, although it largely sold out when Tiger made an initial public offering on the Singapore stock exchange in January 2010.

Mandala was a low-cost carrier operating six Airbus A320 aircraft on lease before it suspended operations Jan. 13. To revive the business, the creditors had to agree to forego any claim they had against the airline and convert the debt into equity. The creditors, along with Indigo and Cardig, now have a combined 16% stake. Mandala had 25 Airbus A320s on order and it is understood that, prior to the airline's collapse, pre-delivery payments were made to Airbus, as is standard practice with aircraft on order.

Industry executives estimate Mandala's previous owners may have paid about $20 million to Airbus, which would make the contract Mandala's biggest asset. Davis declines to comment on whether Mandala will proceed with the A320 purchase or if the aircraft order will be transferred to another party. “These are matters that still need to be worked out,” he says.

Tiger's move into Indonesia will prove challenging, as it will face intense competition from Garuda Indonesia and Lion Air. Tiger's strong association with Singapore will be an impediment, because Indonesia tends to be highly nationalistic and wary of Singaporean companies, particularly those linked to the Singapore government. Singapore government investment arm Temasek Holdings and the national carrier Singapore Airlines are major shareholders in Tiger.

Airlines perceived to be foreign have difficulty attracting Indonesian customers. Indonesia AirAsia has struggled to win market share, even though the Jakarta-based airline has been operating since December 2004. A few years ago, when it was making huge losses, Indonesia AirAsia withdrew from most of its domestic routes and focused on international routes, a strategy that has been credited with its recent profitability. AirAsia has a stronger international brand than Indonesian carriers, making it better positioned to tap the market of foreigners travelling to Indonesia.

Davis declines to comment on Mandala's future strategy or whether the airline will be rebranded. But AirAsia's experience suggests that if Mandala were to take on the Tiger brand and focus on international services, it could still be a very profitable business and a major asset to Tiger Airways Holdings.

Tiger in Singapore is unable to get more traffic rights to Indonesia, because Singapore-based carriers are fully utilizing the country's allocation. But Indonesian carriers have yet to fully utilize Indonesia's traffic rights. A Tiger Indonesia, therefore, would allow the Tiger group to increase services to that country. Tiger in Singapore currently only has two flights daily to Jakarta, even though it has said it wants more. It also has no services to the big tourism destination of Bali, as no Singapore traffic rights are available.

Tiger's Australian outfit also faces a similar problem. Bali, a favorite holiday destination for Australians, is the country's largest outbound leisure market. Tiger Australia is unable to serve Bali, however, as there are no Australian traffic rights available. But Tiger Indonesia could use Indonesian traffic rights to serve major Australian cities from Bali. This strategy means Tiger Indonesia would be making use of the group's existing sales and distribution channels in Australia and Singapore. It could also draw on Tiger's other overseas offices by launching services, for example, to Bangkok, Hong Kong, Macau and Manila.