Feb 2, 2013

Singapore - Tiger Airways gets nod to sell majority stake in Aussie wing

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Tiger Airways is one step closer to selling a majority stake in its Australian wing to Virgin Australia after its shareholders gave the go-ahead yesterday.

During an extraordinary general meeting that was attended by 130 shareholders, all supported the move by the Singapore-based budget carrier to sell 60 per cent of Tiger Australia to Virgin.

But Tiger Airways is still waiting for the Australian Competition & Consumer Commission (ACCC) to approve the proposal.

Virgin Australia will pay about A$35 million (US$36 million) for the majority stake. The joint venture will allow Tiger Australia to grow its fleet from 11 to up to 35 planes by 2018. The Tiger brand name will remain under a 20-year branding deal.

Tiger Airways Holdings will continue to control 40 per cent of Tiger Australia and have two seats in its six-member board. Apart from operating Tiger Singapore and Tiger Australia, the group has stakes in Indonesia's Mandala Airlines and South East Asian Airlines in the Philippines.

Koay Peng Yen, Tiger's group chief executive officer, said yesterday that Virgin Australia - the second biggest airline in the Australian market - will be a good partner for Tiger Australia because it has a larger operation Down Under and "deeper market knowledge".

He added that the immediate proceeds of S$44 million (US$36 million) can be used for working capital and to reduce outstanding loans.

At the meeting, Tiger Airways chairman J.Y. Pillay said running Tiger Australia has been a "tough uphill climb and we are nowhere near the summit".

The Melbourne-based airline had its entire fleet grounded for six weeks in 2011 by the country's aviation regulator over safety concerns.

Jetstar, owned by Qantas, has cornered Australia's budget airline market with a 90 per cent share while Tiger Australia has a 10 per cent share.

Pillay said Tiger Australia is too small a player in Australia and needs a stronger partner to get a critical mass of passengers.

Singapore Airlines, which owns a third of Tiger, will spend about S$133 million (US$107 million) to buy a 10 per cent stake in Virgin Australia.

ACCC chairman Rod Sims had earlier this month expressed his reservations about the planned takeover of Tiger Australia by Virgin Australia, describing it as "complicated".

Pillay said he is confident that the ACCC will approve the Virgin-Tiger partnership.

Jermyn Chow

The Straits Times



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