The deal “is unlikely to lead to a substantial lessening of competition,” Australian Competition and Consumer Commission Chairman Rod Sims said in a statement today. Virgin said Feb. 27 it would drop the bid if the regulator forced it to increase fleet numbers to a specified level.
Virgin Australia Chief Executive Officer John Borghetti, who is targeting corporate customers with business class seats and upgraded lounges, plans to use Tiger to help challenge Qantas Airways Ltd. (QAN)’s 65 percent share of the market. Tiger’s largest shareholder, Singapore Airlines Ltd. (SIA), is helping to fund the takeover by acquiring a 10 percent stake in Brisbane-based Virgin for A$105 million ($108 million).
Tiger, which has never made a profit in Australia since starting services six years ago, was unlikely to remain in the market if the deal didn’t go ahead, the regulator said.
“Absent this conclusion the acquisition raised considerable competition concerns,” Sims said in the statement.
Virgin Australia shares gained as much as 4.6 percent to A$0.46 and traded at A$0.45 as of 10:15 a.m. in Sydney.
Borghetti is also spending about A$95 million in cash and shares buying Skywest Airlines Ltd., which operates regional routes mainly in Western Australia state.
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