The deal, which is worth AU$35 million (GBP22m) in cash, forms part of a new joint venture agreement signed between Tiger and Virgin which the companies said would include “network planning, operational management and procurement”.
In addition to the cash payment, Tiger Australia will pay an annual license fee to its Singapore-based parent for the use of the Tiger brand for 20 years, based on a fixed percentage of Tiger Australia’s total revenue. This branding agreement also includes options to renew for another two periods of five years each. Tiger Australia will also make a payment of GBP3.2m to Tiger Singapore if it achieves certain financial performance targets within five years. Virgin Australia would also reach an agreement to buy Skywest Airlines.
In the meantime, Tiger Australia will continue to operate as a low-cost carrier under the Tiger brand, providing domestic air services in Australia. Its flights will still be offered for sale through the tigerairways.com website.
“This transaction enables Virgin Australia to access the budget market,” said John Borghetti, CEO of Virgin Australia. “By partnering with Tiger Airways, we can use our expertise to leverage Tiger Australia’s competitive cost base and build a sustainable budget carrier. We are committed to maintaining the Tiger Australia business model and brand.”
Abu Dhabi-based Etihad Airways, which owns a 10% stake in Virgin Australia said it was pleased with the announcement.
“These investments by Virgin Australia consolidate its position today as Australia’s most successful and fastest-developing airline. The addition of Tiger and Skywest into its portfolio can only help Virgin Australia’s competitive position in the Australian market and across the Asia-Pacific region,” added James Hogan, president and CEO of Etihad.
SIA buys 10% stake in Virgin Australia
Following Virgin Australia’s decision to purchase a 60% stake in Tiger Airways Australia, the airline has sold a 10% stake to Tiger’s parent company Singapore Airlines (SIA). The SIA stake, which is worth AU$105.3 million (GBP68m) will be acquired through a placement of new shares by Virgin Australia.
SIA and Virgin Australia entered into an operational alliance last year, encompassing codesharing, coordinated schedules and joint sales, marketing and distribution. The airlines said they expect to expand their codeshare routes in future.