SIA / Tiger Air

SIA / Tiger Air: bought 10% of Virgin Australia (VAH.AU) for A$105m in one of three separate deals announced today, as Australia's second-biggest carrier intensifies competition with its main rival Qantas Airways. Virgin Australia said it also agreed to buy 60% of budget carrier Tiger Australia from Tiger Air for A$35m and acquire regional carrier Skywest Airlines (SXR.AU) in a cash and shares offer worth ~ A$95m. SIA says it fully supports the ongoing transformation at Virgin Australia, which has already resulted in a more competitive aviation market in Australia. The deal is a further sign of a strategic shift by SIA as it adapts its business to cope better with the growth of LCCs across Asia and competition from state-backed Middle East rivals. Singapore has also gained a direct stake in Australia's lucrative domestic travel market that has benefited in recent years from the boom in the nation's mining and energy sectors. Virgin Australia said it will issue shares to SIA at A 42.88 cts each, a 6.8% discount to their last traded price of 46 cts, and equal to their 30-day VWAP. The two airlines already have an alliance partnership and it was expected that SIA may want some shares, given Virgin Australia has sold similar-sized stakes in the company to other alliance partners including Etihad Airways and Air New Zealand. Subject to regulatory approval, Virgin Australia will take control of Tiger Australia (wholly-owned subsidiary of Tiger Air) as the budget airline continues to recover from the grounding of its entire fleet last year following safety breaches. SIA currently owns 32.7% of Tiger Airways, which competes directly with Qantas's Jetstar unit. Virgin Australia said it will offer Skywest shareholders A 45 cents per share via A 22.5 cents cash and 0.53 of a Virgin Australia share for each Skywest share. If all three deals are completed, they will boost Virgin Australia's fleet to 139 aircraft from 108 and add 10 new destinations in Western Australia state. Macquarie says the transactions overall represent a monumental shift for Virgin Australia which, if approved, will see a more even playing field in Australian aviation; “they arguably create a replica of Qantas."