AUSTRALIA’S regulatory authority has approved Virgin Australia’s 60 per cent stake in Tiger Airways Australia, a move hoped to tame the latter’s unprofitability and transform it into an effective competitor to Jetstar.
Launched six years ago, Tiger Australia has not reported operating profit since, said the Australian Competition and Consumer Commission (ACCC) chairman Rod Sims.
“We concluded that it was highly likely that Tiger Australia would leave the market if this acquisition didn’t go ahead, and accordingly blocking the acquisition would not serve to protect competition,” he explained.
As such, ACCC would “not oppose” Virgin’s intentions to purchase the Tiger Australia stake for A$35 million (US$35.9 million).
The deal will strengthen the loss-making LCC’s balance sheet by S$128 million (US$103.1 million) and contribute S$120 million to Tiger’s pro forma profit and loss account, Singapore’s The Business Times quoted Tiger Airways group CEO, Koay Peng Yen, as saying. Tiger also completes its S$297 million equity-based fundraising exercise this week.
Both sides have further agreed to inject another A$62.5 million into the business and grow Tiger Australia’s fleet size to 23 aircraft by March 2018, stated the report.
Separately, Singapore Airlines (SIA) is in the process of upping its stake in Virgin Australia through the acquisition of another 9.9 per cent share in the latter to bring its total stake to 19.9 per cent. The move is subject to approval from Australia’s Foreign Investment Review.
SIA acquired 10 per cent of Virgin Australia late last year (TTG Asia e-Daily, October 30, 2012) but the relationship began in 2011 when the two airlines entered into a long-term partnership including codesharing and reciprocal frequent-flyer programme benefits, among others (TTG Asia e-Daily, August 12, 2011).
