Watchdog allows Virgin Australia's 60% stake in Tiger
- Published: 23/04/2013 at 01:49 PM
- Online news:
Australia's competition regulator on Tuesday approved Virgin Australia's purchase of a 60 percent stake in low-cost rival Tiger Airways Australia, despite concerns about the market becoming a duopoly.
Tiger Airways planes are pictured at Melbourne's Tullamarine Airport on July 8, 2011. Australia's competition regulator on Tuesday approved Virgin Australia's purchase of a 60% stake in low-cost rival Tiger Airways Australia, despite concerns about the market becoming a duopoly.
Virgin is Australia's second-largest carrier after Qantas, and the Australian Competition and Consumer Commission (ACCC) had previously said it was worried about the impact on consumers of two main airlines controlling the market.
But it ruled on Tuesday that "this acquisition is unlikely to lead to a substantial lessening of competition in the Australian market for domestic air passenger transport services".
"Essential to reaching this view was the ACCC's assessment... that Tiger Australia would be highly unlikely to remain in the local market if the proposed acquisition didn't proceed," ACCC chairman Rod Sims said.
"Absent this conclusion the acquisition raised considerable competition concerns."
Tiger Airways Australia is the loss-making local subsidiary of Singapore's Tiger Airways and Sims said it had a history of poor financial and operational performance.
It was grounded by Australia's air safety regulator for six weeks in 2011 in an unprecedented move over concerns about pilot proficiency, training and fatigue management.
Sims said the ACCC saw little chance that any other shareholders or partners would be able to turn around the airline, potentially leading to Tiger redeploying aircraft into its Singapore-based parent's global operations.
"We concluded that it was highly likely that Tiger Australia would leave the market if this acquisition didn't go ahead, and accordingly blocking the acquisition would not serve to protect competition," Sims said.
Tiger Australia launched in November 2007 and services 16 domestic routes with 11 aircraft.
Its chief executive Koay Peng Yen said the joint venture would result in a stronger airline.
"With this approval in place, we can now look forward to commencing discussions with Virgin on our plans to grow Tiger Australia and enable it to compete more effectively in Australia's budget carrier space," he said.
The takeover still needs the approval of the Foreign Investment Review Board but Virgin chief John Borghetti said the ACCC nod was an important step towards completing the Aus$35 million (US$35.8 million) acquisition.
"By partnering with Tiger Airways, we can use our local expertise to build a sustainable budget carrier, which will offer great value airfares and benefit jobs and tourism in Australia," he said.
Virgin shares closed 4.6 percent higher at 45.5 cents.
About the author
- Writer: AFP
Position: News agency