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.
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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