Virgin Australia buys all of TigerAir Australia

Virgin Australia buys all of TigerAir Australia

Virgin Australia will take total control of Tigerair Australia under plans to buy the remaining 40% of the loss-making low-cost airline – for the princely sum of $1.

The proposed acquisition comes on top of Virgin's existing 60% stake in Tigerair Australia.

"This proposed transaction marks an important milestone for Tigerair Australia and forms part of the Virgin Australia Group’s Virgin Vision strategy to 2017" said Virgin Australia CEO John Borghetti.

Despite Virgin Australia last year taking a $46.1 million hit from its 60 per cent stake in Tigerair, Borghetti says he intends to bring the airline back into profitability "ahead of schedule by the end of 2016, by leveraging the resources of the wider Virgin Australia Group."

“We remain committed to maintaining the airline’s low cost business model and the separate Tigerair brand, ensuring that we can continue to deliver the most competitive pricing in Australian budget travel” Borghetti added.

International expansion

As part of the proposed acquisition, Virgin Australia will secure the brand rights to fly Tigerair Australia to a number of "short-haul international destinations" beyond its current domestic-only network.

This would increase the ability of Tigerair to compete against Jetstar, especially on popular and price-sensitive leisure spots such as Bali and Phuket, but could also see Virgin Australia axe its own flights to those destinations.

At the same time, Tigerair's domestic flights will likely be pared back.

“Given the ongoing subdued consumer demand in the Australian domestic market, the growth of the Tigerair Australia domestic fleet is likely to be reduced" Borghetti said.

A troubled Tiger

Tiger has suffered turbulent times since entering the Singapore Airline-backed budget carrier Australian skies in November 2007.

It was temporarily grounded by Australia's civil aviation authority over a series of safety and operational concerns in 2011.

Not only has it yet to turn a profit, with half-year operating losses almost doubling to $48 million from a previous $27.6 million, but one analyst pegged the airline as losing "more than $2 million a week" due to intensified competition in the domestic market.

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David Flynn
David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
 

22 comments

  • Colin Steven

    colin5353

    17 Oct, 2014 10:10 am

    “Given the ongoing subdued consumer demand in the Australian domestic market, the growth of the Tigerair Australia domestic fleet is likely to be reduced."


    I bet Adelaide will fall off the Virgin-Tiger route list.

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  • AusFlyer

    AusFlyer

    17 Oct, 2014 10:14 am

    I'm afraid I think Tigerair is going to be a weight on Virgin Australia.... I for one would never choose to fly Tigerair. It has to have the worst service on any airline in Australia.

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  • tmsmile

    tmsmile

    17 Oct, 2014 10:29 am

    The service onboard is not actually the problem (I was unfortunately forced to fly them once). Its the process of flying them that makes it tedious and their horrid inability to recover should something go wrong.

    Then again, I love them because they are so cheap and Jetstar price beats them for me all the time...

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  • watson374

    watson374

    17 Oct, 2014 10:36 am

    "You couldn't pay me to fly Tiger!" exclaimed <insert person>.

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  • Colin Steven

    colin5353

    17 Oct, 2014 10:44 am

    I didnt mind flying with them from ADL-AVV, it was much better than that disaster that was the orirignal Virgin/Impulse terminal at MEL.  Getting my iPad back from Tiger was a much easier than the time I left it on a QF flight from DRW.

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  • Yohy

    Yohy

    17 Oct, 2014 10:53 am

    watch for tiger flights to be added to Fiji, Bali, Phuket as VA withdraws as they continue to move out of the LCC space

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  • RK

    Ryan K

    17 Oct, 2014 10:57 am

    If that's the case, it looks like Jetstar to Bali for me from now on!

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  • abudhabi1

    abudhabi1

    21 Oct, 2014 04:38 pm

    If this happens and I decide to go to Bali again.I'll get Virgin to Melbourne and Go Garuda onwards.I am disappointed the latter dropped Adelaide from it's Map way before all this Schapelle Corby Stuff took place over there that put many od us from ever going back.

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  • sagidec

    sagidec

    17 Oct, 2014 11:10 am

    VA's Little Red? LOL...

    Probably a re-branding would be a new step?

    The brand Tigerair really leaves a sour taste on lots of flyers.

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  • TheRealBabushka

    TheRealBabushka

    17 Oct, 2014 11:10 am

    How much money did Singapore Airlines lose with Tiger?

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  • TheRealBabushka

    TheRealBabushka

    17 Oct, 2014 11:14 am

    Another question.

    What is different about Tiger and Scoot? I'm more interested in the subtext.

    I recalled a story, when Tiger was grounded that the former management of Tiger was incompetent.

    Did Singapore Airlines realise then that it had to cope with mediocrity, when in a joint venture with Australian partners (as is with Tiger) and is now giving up on Tiger completely as it focuses on Scoot?

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  • hutch

    hutch

    17 Oct, 2014 03:23 pm

    To my knowledge Tiger Singapore still exists alongside Scoot. Tiger is solely narrow-body and Scoot wide body. 

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  • Murse24

    Murse24

    17 Oct, 2014 11:24 am

    They over paid if you ask me....

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  • moa999

    moa999

    17 Oct, 2014 01:31 pm

    While the equity is $1, you have to ask how much (ie 40% of) debt and lease liability have they also effectively taken over.

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  • eminere

    eminere

    17 Oct, 2014 11:50 am

    What an incredible business decision. I can't imagine Tiger being anything other than a millstone around Virgin's neck.

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  • Skippybear

    Skippybear

    17 Oct, 2014 12:20 pm

    The only way I can see this being successful is rebranding since the name Tiger has so badly sullied (just as CASA did to the Ansett brand).

    They need to move away from Navitaire and use the SABRE platform. They need to get rid of the 60-minute check-in cut-off and look at being more relaxed with the rules regarding excess and overweight baggage now that Jetstar are clamping down on these and attempting to extract even more money from their passengers. In case of disruption there should not be a 2nd thought about transferring passengers onto VA where capacitity is available since it's all going into the same overall moneypot.

    With the bulding of Terminal 4 at Tullamarine there is the chance to totally relaunch the airline. It may even be prudent to bring staffing inhouse instead of using contract labour.

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  • leisuretraveler

    leisuretraveler

    17 Oct, 2014 12:38 pm

    look out for Tiger replacing Virgin flights to  leisure destination like Bali where Virgin cannot make a profit and probably Tiger will also make a loss due to the amount of competition.

    Paying $1 for the remaining 40% suggests that Virgin paid too much for its 60% share


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  • UpUpAndAway

    UpUpAndAway

    17 Oct, 2014 01:16 pm

    One reason I prefer Virgin over Qantas is that Qantas puts me on Jetstar flights, Virgin better not start doing that with Tiger. 

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  • E63AMG

    E63AMG

    17 Oct, 2014 11:27 pm

    "This proposed transaction marks an important milestone for Tigerair Australia and forms part of the Virgin Australia Group’s Virgin Vision strategy to 2017" said Virgin Australia CEO John Borghetti.

    Sounds like QF group mark II! Ahh, ya can take the boy out of Qantas, but ya can't take Qantas out of the boy!

    It will probably take until 2017 before Borghetti gets VA back to some sort of profit, especially looking at their end of year results, most of their aircraft have second mortgages on them now, that's how desperate they are for cash to fund to their plan.

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  • Anthony Baildon

    abaildon

    18 Oct, 2014 06:35 am

    Such interesting comments here on this story, but no one talks about the price of the airfares the the various airlines offer.  I prefer to fly virgin, even over qantas, but jetstar always beats the price, and by a fair bit.  Tiger hardly fly out of Brisbane, but to Sydney, I see they are far cheaper than all of them.  Providing I'm not on a tight schedule, I'd fly them based on price anytime.  Their safety record is of no concern to me here in Austrailia.  They are not russian or indonesian planes or pilots afterall!  New carriers have a history of trouble here, and usually end up failing.  I hope Tiger, under Virgin, do well, and become a great competitor to Jetstar.  Qantas does its best to dominate the market, and they usually succeed.  All the best to Tiger, hopefully they will do better than BPA, FlightWest, Ansett, Compass and now it would seem SkyTrans!

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  • ozboy62

    ozboy62

    19 Oct, 2014 10:04 am

    I think ditching the tiger brand will help and perhps call it Virgin Express or even Bring back the V Australia branding  if they will be flying to overseas locations. and change the booking system to the same as Virgin's booking system with the same conditions for boarding etc, I guess they could have a greater scale for checked baggae pricing similar to Jetsatar.

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  • Skippybear

    Skippybear

    19 Oct, 2014 11:07 am

    Why not call them Virgin Lite and go for a no checked-in baggage model. Definitely need to move from Navitaire due to the past problems with that platform.

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