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Virgin Australia to Gain Full Ownership of Tiger Australia Airways for A $1

Date:17-10-2014

Virgin Australia Holdings Ltd will buy out its ailing Tiger Australia Airways for A $1. Virgin Atlantic will acquire full control of Tiger Airways from its current 60 percent stake in turnaround efforts.

14 months ago, Virgin Australia purchased its original 60 percent stake from Tiger for $30.74 million (A $35 million).

Australia's domestic aviation market has been under intense pressure as local carriers, which also includes, Qantas Airways Ltd, it had engaged in a bitter price war just as demand fell with a faltering economy, the. After racking up more than $2.63 billion (A $3 billion) in combined losses in the financial year2013-2014, Qantas and Virgin Australia declared they would start cutting available seats to drive tickets higher.

The deal comes at a time when Tiger Airways reported heavy losses of its airplanes. Tiger Airways said that Singapore's flag carrier Singapore Airlines Ltd would raise its stake to 55 percent from 40 percent currently.

John Borghetti, chief executive officer of Virgin Australia said that under this proposed transaction, they will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016.

In August, reporting its annual loss, Virgin declined to give profit guidance, citing uncertainty about the Australian aviation market.

Virgin's stake in Tiger generated losses of A $46 million, for a year. Virgin’s losses from Tiger grew 20 percent to A $11.6 million in the quarter to September 30.

For the three months to end-September, Tiger reported a loss of $143 million(S $182.4 million), largely due to S$99.3 million charge for "the sublease of surplus aircraft". A year ago for the same period, Tiger Australia Airways booked a net profit of S $23.8 million.

Tiger added that it was proposing a rights issue of up to S $234 million, with Singapore Airlines agreeing to subscribe to up to S $140 million of those rights shares.

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