Virgin Australia Pays A$1 for Rest of Tiger Airways’ Local UnitDavid Fickling
Virgin Australia Holdings Ltd., the country’s second-ranked carrier, will buy the remainder of Tiger Airways Holdings Ltd.’s local unit for A$1 (88 cents).
Virgin, which paid A$35 million for a 60 percent stake in the budget airline in 2013, said in a regulatory statement today that it would continue to operate the brand while slowing the growth of the loss-making unit’s fleet.
The Tiger group, owned 40 percent by Singapore Airlines Ltd., hasn’t made a full-year profit since 2011, when the Australian unit was suspended from domestic flights for six weeks after a pilot flew too low approaching Melbourne airport. Virgin said today its share of Tiger Australia’s losses in the three months through September amounted to A$11.6 million.
The deal is “fundamentally about fast-tracking the business to profitability,” Sankar Narayan, Virgin Australia’s chief financial officer, said on a conference call after the announcement today. “This is the quickest way that we can get Tiger on a break-even proposition.”
The plan was for the airline to be profitable by the end of the 2016 calendar year, with Tiger and Virgin sharing more back-office costs and coordinating their routes better to eliminate losses, he said.
Tiger currently flies to 12 destinations in Australia, including all the state capitals as well as Darwin and five holiday destinations on the country’s east coast including Cairns, the Gold Coast and Mackay.