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Much happening after Virgin buys up Tigerair for $1

October 20, 2014 Aviation, Headline News 1 Comment Email Email

egtmedia59Virgin Australia will pay just one dollar to take full ownership of Tigerair Australia. The tiny $1 investment, a token amount, will buy it 40% of the company. It bought the other 60% a year about for AUD 35 million.

Tigerair has yet to make a profit in Australia and a loss-making company is not worth much. Virgin’s stake in Tigerair produced an AUD 11.6 quarterly million loss in the three months to September.

For AUD 1 Virgin Australia will acquire the rest of the Tigerair Australia domestic franchise from the Singaporean holding company.

In a complex deal, Singapore Airlines plans to convert its perpetual convertible capital securities into Tiger Airways shares, thus boosting stake to a controlling 55% from a current minority 40%, a statement filed by the Singapore-listed holding company explained.

Tiger Airways has announced plans to raise SGD 234 million in a rights issue. Local reports say it would be mostly subscribed by Singapore Airlines.

The upshot of all this, analysts say, is that with Virgin Australia taking all future Tigerair Australia losses and commitments off Tiger Airways’s books, the low-cost carrier, soon to be controlled by Singapore Airlines,  will be in a strong position to face the challenge of Jetstar Asia.

Chief executive John Borghetti said full ownership of Tigerair would enable Virgin to bring the discount carrier to profitability within two years.

“Under this proposed transaction, we will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016, by leveraging the resources of the wider Virgin Australia Group,” he said.

Australia’s Tourism & Transport Forum (TTF) said Virgin Australia’ acquiring remaining 40% of Tiger Australia Airways would “secure the existence of Australia’s fourth national domestic carrier” and was therefore “good news for the Australian tourism industry”.

“Over the past 14 months, the efficiencies gained through Virgin Australia’s partial ownership of Tigerair have flowed through to consumers,” TTF Chief Executive Margy Osmond said.

“This has strengthened the position of the low-cost carrier in the Australian market.

“A complete joint venture would be a practical outcome that will benefit Australia’s AUD 100 billion tourism industry and the 543,000 people it directly employs.

“Securing the viability of a second low-cost carrier also ensures healthy competition in the domestic market.

“This will protect consumer choice and assist in keeping fares down for passengers.”

Written by Peter Needham

Currently there is "1 comment" on this Article:

  1. AgentGerko says:

    How does it go? How do you find a millionaire? First, find a billionaire and then get him to invest in an airline.

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