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Singapore Airlines secures its Australian aviation platform with Virgin stake
THE Foreign Investment Review Board (FIRB) is expected to approve the application by Singapore Airlines to increase its stake in Virgin Australia, while Virgin's own purchase of a controlling stake in budget carrier Tiger Airways Australia - itself largely owned and controlled by Singapore Airlines - is FIRB approved and set to proceed in July.
Singapore Airlines has agreed to acquire another 9.9 percent of Virgin Australia in a move that will increase its stake to 19.9 percent. Singapore Airlines reported it would purchase 255.5 million shares at 48 Australian cents per share for a total consideration of A$122.6 million.
The strategic stake will be acquired through the purchase of shares held by Richard Branson's Virgin Group and will help secure Singapore Airline's long, steady approach to establishing Australia as its most important market after Singapore itself.
Apart from the commercial advantages of the move in tapping into a strong domestic travel market, it is expected to boost other related activities, such as the extensive Singapore Airlines pilot training and maintenance services conducted in association with Aeromil Pacific on the Sunshine Coast.
Last month the FIRB approved Virgin Australia Holdings Ltd's plan to take control of loss-making rival Tiger Airways Australia.
This will accelerate the battle for domestic budget air travellers with Qantas Airways' Jetstar unit, according to industry analysts, while Virgin Australia continues to upgrade its service offering to compete more directly with Qantas.
Virgin announced plans in October to buy 60 percent of Tiger Australia for $35 million and invest a further $62.5 million to increase the fleet size to 35 aircraft from 11 by 2018.
The moves by Virgin Australia and Singapore Airlines are also seen as a repositioning in response to Qantas establishing its global alliance with Emirates Airlines. Virgin has an alliance with United Arab Emirates rival and national carrier, Abu Dhabi-based Etihad Airways.
"Our partnership with Virgin Australia has been going from strength to strength, offering a wide range of consumer benefits," said Singapore Airlines CEO Goh Choon Phong.
"Increasing our stake in Virgin Australia is another example of Singapore Airlines' deep commitment to the important Australian market.
"It also demonstrates our support for the ongoing transformation of Virgin Australia, which has created a more competitive aviation market in Australia."
Singapore Airlines acquired 10 percent of Virgin Australia in late 2012 through an injection of funds in Virgin Australia Holdings.
The two airlines entered into a long-term partnership in 2011, encompassing code-sharing, reciprocal frequent flyer programme benefits and lounge access, co-ordinated schedules to provide seamless connections, and joint sales, marketing and distribution activities.
Singapore Airlines is already Australia's largest foreign carrier and operates a total of 112 weekly services from Adelaide (10 Airbus A330 flights a week), Brisbane (three daily with Airbus A330s), Melbourne (three daily with A380s and Boeing 777s), Perth (four daily with A330s and B777s), Sydney (four daily with A380s and B777s), and Darwin (four weekly with Airbus A320s operated by subsidiary SilkAir).
Singapore Airlines and SilkAir are currently offering customers transiting through Changi Airport S$40 worth of vouchers to use at more than 450 retail outlets in the transit and public areas of Terminals 1, 2 and 3. The vouchers will be issued until June 30 and are valid for use through to March 31, 2014.
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