Virgin on Friday (Oct 17) took full control of budget carrier Tigerair Australia, buying the remaining 40 percent it did not already own for A$1 (88 US cents) from its Singapore-listed parent.
Virgin Australia purchased a 60 percent stake in mid-2013 for A$35 million and said Tiger Holdings had agreed to sell the rest of the carrier, which has struggled to reach profitability, for the tiny sum, effectively ending their joint venture. Tiger will continue to licence its brand to Virgin.
Virgin Australia chief John Borghetti said the acquisition would allow it to fly to a number of new short-haul international destinations, providing growth opportunities for the business, while accelerating Tiger's drive for profitability.
"Given the ongoing subdued consumer demand in the Australian domestic market, the growth of the Tigerair Australia domestic fleet is likely to be reduced," he said. "Under this proposed transaction, we will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016, by leveraging the resources of the wider Virgin Australia Group."
Tiger, the local subsidiary of Singapore Airlines' Tiger Airways, has a history of poor financial and operational performance.
The move, which is subject to Foreign Investment Review Board approval, comes after a difficult 12 months for Australian airlines as intense battle for market share saw both Virgin and Qantas suffer heavy losses. Virgin posted a full-year net loss of A$355 million, while Qantas suffered a record loss of A$2.8 billion.
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