Virgin Australia Sells 10% Stake to Singapore Airlines
- Published: 30/10/2012 at 10:59 AM
- Online news:
Virgin Australia Holdings Ltd (VAH) sold a 10% stake to Singapore Airlines Ltd. (SIA) and sought control of two local rivals, creating the biggest challenge to Qantas Airways Ltd's (QAN) market leadership in more than a decade.
Singapore Air will spend A$105 million (US$108 million) on new Virgin shares, according to a statement on Tuesday. Brisbane- based Virgin will pay at least A$35 million for 60% of budget carrier Tiger Airways Holdings Ltd. (TGR)’s Australian unit and it will bid for all of regional operator Skywest Airlines Ltd. (SXR), according to filings.
Virgin jumped the most in eight months on the deals, as Chief Executive Officer John Borghetti builds on a strategy of alliances that already includes investments from Etihad Airways PJSC and Air New Zealand Ltd. (AIR) The move adds to pressure on Qantas, which last month announced a tie-up with Emirates in a bid to end losses on international routes.
“They’re going to give Qantas a run for their money,” Simon Fitzgerald, an analyst at Moelis & Co. in Sydney, said by phone. Borghetti “is making really well thought-through strategic moves with this company. He’s not sitting back waiting for things to happen.”
Buying control of Tiger Australia will give Virgin a budget brand to compete with Qantas’ Jetstar and bolster its operations on Australian east coast routes where competition has driven business-class ticket prices to 20-year lows.
Tiger Australia, whose parent is part-owned by Singapore Air, won back a full operating licence this month after fixing safety faults that had caused regulators to ground the carrier last year.
“Tiger will allow us to compete against the Jetstar brand much stronger,” Borghetti told a media conference in Sydney.
About the author