VA takes 100% of Tiger Australia

[markis10]

Purchased the remaining 40% interest for $1.

http://www.asx.com.au/asxpdf/20141017/pdf/42syywv5jzqt00.pdf

Virgin Australia Holdings today announced a transaction which would see Virgin Australia aquire the remaining 40% of shares in Tiger Australia Airways Pty Ltd from Tiger Airways Holdings Ltd for $1.

 

[yohy?!]

interesting, wonder what's next?

give it a little more time and if still loss-making then fold it back into VA and use all economy config on leisure routes?
have them take over all the DPS flying to make the routes more profitable?

or more likely scale back the operation to get back into black whilst still nipping at JQs most profitable routes?

 

[smit0847]

Frtom ABT:

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.
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, providing new growth opportunities for the business.
"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.
“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 aims to bring TigerAir Australia 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.
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.

This doesn't seem like a particularly smart move - its hardly a valuable company given 40% can be bought for $1. It's never made a profit and now its compeditors are doing the same - what exactly does VA think is going to change? It has a terrible image. As much as I hate TT I think integrating it more with the VA brand would actually be about the only solution - encourage VA pax to fly TT by offering VA benefits just like QF do with JQ.

 

[Fruitcake]

As much as I hate TT I think integrating it more with the VA brand would actually be about the only solution - encourage VA pax to fly TT by offering VA benefits just like QF do with JQ.

Virgin Australia chief tempers expectations for expansion of Tigerair

"We call it marketing segmentation 101 of the Tiger experience and the Virgin experience," [Mr Borghetti] said. "The two shall never meet."

 

[Simsy85]

Gawd I wish they'd fly out of CBR - might help push down the prices of VA and QF

 

[yohy?!]

by the sounds of it they will use tiger to retool their short haul int. approach supplementing with TT where appropriate to the market

i imagine HKT, DPS, NAN, VLI are all up for review to see if some or all of the VA capacity should be replaced with TT

 

[777]

Jetstar will beat this by 10% right? This means i can buy 40% of Jetstar for 90c?

 

[smit0847]

by the sounds of it they will use tiger to retool their short haul int. approach supplementing with TT where appropriate to the market

i imagine HKT, DPS, NAN, VLI are all up for review to see if some or all of the VA capacity should be replaced with TT

They would be INSANE to attempt DPS with an A320 with XT about to launch. No-ones going to pick TT over a JQ 787 for $199. Some of the pacific islands routes may make sense though.

 

[a330j]

A buck - far too much given Virgin's $11.6m share of Tiger's loss for the first quarter.

 

[yohy?!]

They would be INSANE to attempt DPS with an A320 with XT about to launch. No-ones going to pick TT over a JQ 787 for $199. Some of the pacific islands routes may make sense though.

i agree for SYD/MEL but other ports a different story

 

[harvyk]

So the whole company is only worth $2.50? I'll offer them $3...

Considering the price of a single A320 to buy, it'd be a very cheap way to get my own fleet of them, sell a few of them and there is my petrol money, do up the insides = cheap private jet...

 

[Justchecking]

Virgin Owns Tiger 100%

Virgin takes full control of Tigerair

I wonder how long before the Bali and coughet flights are tiger operated. Kiss business class goodbye there.

 

[Bundy Bear]

So the whole company is only worth $2.50? I'll offer them $3...

Considering the price of a single A320 to buy, it'd be a very cheap way to get my own fleet of them, sell a few of them and there is my petrol money, do up the insides = cheap private jet...

And you think Tiger actually owns those A320s, I think the bank or leasing company would own the planes.

 

[smit0847]

Re: Virgin Owns Tiger 100%

I think we'll see 787s in QF colours before we see TT make a profit. VA may be attracted by the ability to change (dump) unprofitable leisure routes from VA to TT to reduce costs but they don't seem to understand that TT is a very undesirable brand that most people avoid with a barge pole. It's not a matter of 'build it and they will come' as there are very reasonable alternatives with JQ (especially with JQ's Price Beat). I would choose JQ over TT even with no earn purely because JQ has their PBG and TT use the hideous T4 in MEL whereas JQ use a real terminal.

The first step would be to rebrand TT with some link to VA's popular branding (wasn't there talk some time ago about the possibility of using the DJ name?).

Im not sure how an unprofitable airline expects to make an even less profitable, extremely unpopular airline profitable in a fiercely competitive market. The only reason anyone would pick TT is price or lack of other options. Can anyone think of a single other reason why anyone would fly with them??
I don't think they have a monopoly on any routes so the second reason disappears and they're not going to make a profit competing with JQ on price. Unless they dramatically reduce the price of short haul intl routes that TT take over (like 50% reductions) I have no interest in flying them with no VA status benefits.

VA have made some brilliant decisions in the last few years (the status match campaign during the QF grounding was a stroke a genius) but this one makes no sense at all - more headaches, more burdens and more money down the toilet. I can understand them not wanting to dilute their VA brand by doing a lot of program integration but there is no benefit for VA pax to consider flying TT. Where do they expect these new customers to come from?

EDIT: Just saw TT has a 90% load factor and still can't make money! What do they plan to do? Increase fares are drive pax away to JQ?!

 

[Justchecking]

Re: Virgin Owns Tiger 100%

VA have made some brilliant decisions in the last few years (the status match campaign during the QF grounding was a stroke a genius) but this one makes no sense at all - more headaches, more burdens and more money down the toilet. I can understand them not wanting to dilute their VA brand by doing a lot of program integration but there is no benefit for VA pax to consider flying TT. Where do they expect these new customers to come from?

EDIT: Just saw TT has a 90% load factor and still can't make money! What do they plan to do? Increase fares are drive pax away to JQ?!

Maybe they've figured out that status pax don't often fly them to bali and coughet anyway? If the majority of the pax to those destinations are price shoppers then you may as well offer the worst product at the cheapest price.

 

[777]

Re: Virgin Owns Tiger 100%

I would choose JQ over TT even with no earn purely because JQ has their PBG and TT use the hideous T4 in MEL whereas JQ use a real terminal.

On that particular one: JQ are Tiger are both moving to the same terminal in Melbourne (the new T4) when it is completed next year. From then on i think JQ and TT will be using the same terminals in most cities?

 

[dk4]

Re: Virgin Owns Tiger 100%

From then on i think JQ and TT will be using the same terminals in most cities?

There are only 3 airports with multiple domestic (mainline + major regional) terminals aren't there? SYD, MEL & PER (with BNE just one long terminal with multiple piers, and Rex in ADL doing some sort of hybrid operation?) So, all domestic airlines use the same terminal except in those three locations?

In Sydney, there are 2 domestic terminals, all airlines except QF using T2.
In Melbourne, currently 3 domestic terminals, with T4 being expanded/rebuilt to accommodate JQ as you indicate.
In Perth, currently 3 domestic terminals, being expanded to 4 domestic terminals soon. Eventually becoming: T1(domestic pier) = VA, T2 = TT & some VA, T3 = JQ & some QF & T4 = QF.

I imagine that what $1 bought VA today, was a whole lot of debt (not offset by the small amount of capital they gained), however less debt than it would have cost to set up their own greenfield LCC operation.

 

[Paul_PER]

Re: Virgin Owns Tiger 100%

Looks like some rationalisation by the Singaporeans. They keep Singapore Airlines, with Tiger Holdings as their short haul LCC flying just A320's ex. Changi and Scoot as their long haul LCC flying second hand 777's (to be replaced by 787's).

I re-read the ACCC press release of April 2013 - looks like their reasoning for allowing Virgin buying 60% pretty much carries over to allowing 100% ownership.

Virgin Australia will probably keep the Tiger name - probably paying a royalty to Tiger Holdings much like Virgin Australia pays RB now for the Virgin name - that would appeal to Tiger Holdings - getting paid something regardless of Tigerair's profitability. I can see Tigerair flying routes such as PER-DPS shared with Virgin on the same sort of "yield managed basis" as Qantas / Jetstar on SYD-HNL. Jetstar and Tiger Holdings have already tried international services to and from Darwin and pretty much failed so I'm not sure Tigerair would try there. Jetstar have tried Perth to Lombok and already given up. So I don't see a huge amount of change for Tiger in Australia except minor tweaks like how Qantas has handed over and / or shared routes with Jetstar.

So everyone ends up with three core airlines to concentrate on:

Singapore Inc - SA, Scoot, Tiger
Virgin - VA, Virgin Regional, Tigerair
Qantas - QF, Qantaslink, Jetstar

The Singaporeans keep the Australian LCC passenger feed into Tiger Holdings with Scoot (from the Australian east coast) and Tiger (from Perth). I understand that Tiger and Scoot in Singapore now interline. VA gets complete control of Tigerair to mirror QF / Jetstar Australian domestic operations. Funny how everyone pretty much ends up with the same business model..

 

[docjames]

I don't doubt there's a clause re: retaining the tiger name, but Tiger in Aus has such a poor reputation you'd think a rebrand ("Virgin lite"??) would be in order.

 

[RooFlyer]

Purchased the remaining 40% interest for $1.

http://www.asx.com.au/asxpdf/20141017/pdf/42syywv5jzqt00.pdf

They overpaid.