In a move that had yours truly baffled, Virgin Australia has announced plans to increase its ownership of Tiger Airways from its current 60 percent holding to 100 percent, for the grand sum of $1.
The move has been brewing for some time and comes on the back of Virgin Australia announcing a joint venture with Tiger Airways on the 8th of July, 2013.
Once complete, the transaction will ensure Virgin Australia has full ownership of Tiger Airways and allow it to secure the branding rights for Tiger Airways and operate a number of flights to short-haul international destinations. This move is expected to grow the value of Tiger Airways.
Virgin Australia Chief Executive Officer, John Borghetti said: “This proposed transaction marks an important milestone for Tigerair Australia and forms part of the Virgin Australia Group’s Virgin Vision strategy to 2017.
“Given the ongoing subdued consumer demand in the Australian domestic market, the growth of the Tigerair Australia domestic fleet is likely to be reduced. 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.
“Tiger Holdings and Virgin Australia have worked well together over the past 14 months on building a strong operating platform for Tigerair Australia. The joint venture has strengthened systems and processes, increased aircraft utilisation, established a Brisbane base and leveraged synergies across a range of areas.
“We remain committed to maintaining the airline’s low cost business model and the separate Tigerair brand, ensuring that we can continue to deliver the most competitive pricing in Australian budget travel”, Mr Borghetti said.
The final approval for the sale will need to wait for the green light from the Foreign Investment Review Board, along with Tiger Airways shareholder approval.
The transaction is expected to be completed by the end of 2014.