The Australian Competition and Consumer Commission has cited concerns over Tiger Australia’s financial viability in announcing it will “not oppose” Virgin Australia’s takeover of the local arm of the Singaporean-based low cost carrier.
“Essential to reaching this view was the ACCC’s assessment, made after thorough and extensive testing of the issue, that Tiger Australia would be highly unlikely to remain in the local market if the proposed acquisition didn’t proceed. Absent this conclusion the acquisition raised considerable competition concerns,” ACCC chairman Rod Sims said.
“The ACCC also tested the likelihood of Tiger Australia’s performance being improved by either its current owner (the Singapore-based Tiger Airways Holdings Limited) or other potential shareholders or joint venture partners if the proposed acquisition did not proceed. The ACCC considered it unlikely given the current circumstances that Tiger Australia would be turned around under any of these scenarios to provide vigorous competition as an independent operator. Instead its key assets, being the 11 Airbus aircraft, would very likely be redeployed into the Asian operations of its parent company.”
In a statement, Virgin Australia Group CEO John Borghetti welcomed the ACCC’s decision: “We are very pleased to receive clearance from the ACCC for the proposed acquisition of 60 per cent of Tiger Australia. There is a real opportunity to provide strong competition in the budget travel segment and bring further benefits to consumers.
“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.”
Tiger Airways, too, welcomed the news.
“We are delighted to receive the green light from the ACCC on this transaction,” Koay Peng Yen, Group CEO of Tiger Airways, said. “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 the Australia’s budget carrier space.”
and Federal Infrastructure and Transport Minister Anthony Albanese also welcomed the decision: “The decision is good for Virgin and Tiger and tourism generally. Most importantly, this decision is good for jobs which will now be retained.”
The Australian airline market will now return to an in-effect duopoly situation with the expanded Virgin-Tiger grouping facing off against Qantas and Jetstar. Tiger currently operates 11 Airbus A320s on 16 domestic routes.
Acknowledged Sims: “The ACCC would always prefer to see a greater number of independent airlines competing in the domestic market. However, our investigations showed that Tiger Australia had been unable to establish itself as a viable competitor despite substantial investment and numerous changes of management and strategy over the years. 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.”
Virgin Australia announced plans to acquire a 60 per cent of Tiger Australia last October as part of a deal that has seen Tiger part-owner Singapore Airlines acquire a 10 per cent stake in Virgin Australia. Under a separate agreement announced at the same time Virgin also revealed plans to take over Skywest (which took effect earlier this month).
At that time Virgin said it would grow the Tiger Australia fleet to up to 35 aircraft by the end of 2018.
Virgin notes that further approvals still remain for the Tiger deal, including from the Foreign Investment Review Board.