Virgin Australia will acquire the remaining 40% of Tiger Australia, its cash-bleeding cheap seat competitor to Jetstar, from its Singaporean shareholders for $1.
The transaction will give Virgin Australia 100% ownership and full control of Tigerair Australia and brings to a conclusion the joint venture with Tiger Holdings which started on July 8, 2013.
Virgin also gets brand rights to fly Tigerair Australia to a number of short-haul international destinations, providing new growth opportunities for the business.
Tigerair Australia was in the June quarter losing about $2 million a week. It lost $46.1 million in the last financial year and wasn’t expected to be profitable until 2017.
CEO John Borghetti says growth of the Tigerair Australia domestic fleet is likely to be reduced given the subdued consumer demand in the Australian domestic market. Tigerair has 13 A320 aircraft.
“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 says.
“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.”
The partnership between Virgin Australia and Tiger Holdings will continue into the future through brand licencing and certain services which will continue to be provided by Tiger Holdings direct to Tiger Australia.
The transaction is also subject to Foreign Investment Review Board approval, Tiger Holdings shareholder approval and entering into long-form licensing agreements and services agreements.
Virgin Australia expects the deal to go through before the end of the year.