Facing a tough travel industry outlook, Singapore budget carrier Tiger Airways priced its US$178 million ($247 million) IPO — Asia's first airline offering in nearly five years — in the middle of an indicative range. 

 

Tiger’s initial public offering comes as some traditional carriers are pushed to the brink of bankruptcy and state airlines are turning to governments for aid. 

 

Tiger, 49% owned by Singapore Airlines (SIAL.SI) and part-owned by state investor Temasek (TEM.UL), set the IPO price at a mid-range $1.50 a share, valuing the offer at around $248 million, said two sources close to the deal, who declined to be named as the details are not yet public. 

 

A Tiger Airways spokesman declined to confirm the final price. 

 

“Since this is the first airline IPO in so many years, some people might get a bit excited, although I think the pricing is too high,” said one analyst at a local brokerage. 

 

The IPO values Tiger at 12.64 times its March 2011 earnings, compared with Malaysian rival AirAsia (AIRA.KL), which currently trades at around 7.6 times its 2010 earnings. 

 

One of the sources said institutional sales were more than 4 times subscribed and the public offer was more than 20 times subscribed. 

 

The airline will list its shares on the Singapore Exchange on Friday. Citigroup (C.N), Morgan Stanley (MS.N) and DBS (DBSM.SI) are handling the IPO, according to the prospectus. 

 

Tiger said it would use the proceeds to fund aircraft purchases and set up a new operating base, as well as to pay off some existing debt. 

 

The airline has grown rapidly since it began operations in Singapore in September 2004 and briefly turned profitable in its third year of service. 

 

It posted a $50.8 million loss for the year to March 2009 due to costs incurred in starting up operations in Australia, where it competes against Qantas Airways Ltd's (QAN.AX) Jetstar. 

 

Tiger has 17 Airbus (EAD.PA) A-320 aircraft in service, with orders for another 55 A-320s for delivery by 2016. 

 

The airline is selling around 165 million shares, or about 30% of its enlarged share capital. 

 

About 94.2% of its IPO comprises new shares, while the remaining 5.8% are vendor shares held by Indigo Partners. 

 

RyanAsia, a company controlled by the founding family of Irish budget airline RyanAir (RYA.I), will divest some of its stake in Tiger if an over-allotment option is exercised. 

 

Singapore Airlines and Temasek will remain invested, although their stakes will be diluted after the IPO.