Virgin Australia’s planned purchase of control of Tiger Australia sets the scene for it having a 2nd low cost brand similar to Qantas’s Jetstar,  with 35 Airbus A320s in service by 2018, and with seamless strategic linkages with Tiger’s Singapore based operations as well as that entity’s interests in Indonesia’s Mandala Airlines and SEAir in the Philippines.

It counters the Qantas two brand strategy utilising its domestic and Asian Jetstar franchises, the largest of which is also based in Singapore as Jetstar Asia.

The Virgin Australia move, which costs an up front purchase price of $35 million and on-going licensing fees to Tiger Singapore,  and a commitment to fund a more than tripling of the size of Tiger Australia in six years, will be in parallel with Virgin’s strategic full service alliance over Singapore airport with Singapore Airlines and its premium value SilkAir regional Asian subsidiary.

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This is how the current operations of Virgin Australia and Tiger Australia compare, and how the integration of the full service and low fare brands is intended to proceed.

The Tiger branding will continue to apply to the Tiger Australia operation.

Tiger Australia will be managed as a standalone entity with a separate board and management, with a chair appointed on a rotating basis by the Virgin Australia and Tiger Singapore, with the inaugural chair being John Borghetti, the CEO of Virgin Australia.

In its second quarter financials released before the start of trading on the Singapore Stock Exchange Tiger Holding’s losses after tax narrowed for the three months to $SG 18 million compared to $SG 50 million in the previous quarter.  Of this the losses of its Australian arm reduced from a previous $SG 27 million to $SG 20 million, which means that all of the group’s losses in the three months to 30 September were made in Australia.

 

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Peter Fray
Peter Fray
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