Virgin takes full control of Tigerair
 

Virgin Australia is cementing its grip on loss-making budget carrier Tigerair Australia, buying the 40 per cent stake it doesn't already own for $1.

The purchase from Singapore-listed Tiger Holdings - announced as Virgin reported a $45 million first-quarter pre-tax underlying loss - will give Virgin full control of the airline and brand rights to fly Tigerair to a number of short-haul international destinations.

The $1 price for 40 per cent is a far cry from the $35 million Virgin paid for its existing 60 per cent stake in the budget carrier last year.

However, Virgin will now have to take on the full share of Tigerair's losses, which rose in the first quarter relative to the prior year.

Virgin chief executive John Borghetti said that as consumer demand in the Australian domestic market continued to be subdued, the Tigerair domestic fleet was likely to be reduced. "Under this proposed transaction, we will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016, by leveraging the resources of the wider Virgin Australia Group," he said.

Virgin said its first-quarter underlying loss represented an 18.3 per cent improvement over the prior corresponding period, with the first quarter being traditionally a weak business period. Last year, Virgin reported a $49 million underlying pre-tax loss in the first quarter, implying the second quarter was profitable.

The latest result excluded $11.6 million of quarterly pre-tax losses from Tigerair, up from $9.7 million last year due to ongoing subdued consumer sentiment.

The Virgin figures compare with Qantas' forecast of a pre-tax underlying profit in the first half of the financial year.

Virgin chief financial officer Sankar Narayan said that while the leisure market remained subdued, the airline had delivered further growth in the corporate and government segment and made good progress in containing costs. Overall, revenue rose by 1.3 per cent but continued weakness in leisure demand resulted in yields, or returns on fares, remaining in line with last year. Costs rose by less than 1 per cent in the first quarter.

Mr Narayan said that at the end of September, forward booking revenues for Virgin were up 3 per cent relative to the same time last year.

Overall, Virgin increased its domestic capacity by 0.5 per cent in the first quarter, with its load factor, or percentage of seats filled, falling by 1 percentage point to 77.2 per cent. Tigerair increased its capacity by 9 per cent from last year and its load factor increased by 0.5 percentage points to 90.2 per cent in the first quarter.

Mr Borghetti did not say whether Tigerair would replace Virgin on flights to international leisure destinations such as Bali, Phuket, Fiji and New Zealand as part of the Virgin acquisition. Virgin last year reported a loss from its international operations.

The Bali route in particular is becoming more competitive, with Indonesia AirAsia X poised to launch flights from Melbourne and Sydney to Bali by the end of the year.

Virgin, which last year reported a $46.1 million loss from its current 60 per cent stake in Tigerair, expects the deal will be completed by the end of the year.

Mr Borghetti last month told Fairfax Media that Virgin planned to slow the growth of Tigerair relative to its initial plans.

On Friday, he emphasised Virgin remained committed to maintaining Tigerair's low-cost business model and separate brand to ensure it could deliver the most competitive pricing in Australian budget travel.

Tiger Holdings is part-owned by Singapore Airlines, which is one of the largest shareholders in Virgin.



Read more: Virgin takes full control of Tigerair

Subdued leisure market with 90% loads? Seems pretty high ? :confused:

Any guesses as to where JB might get a few unproductive A330's from to throw at Tiger?

I think JB paid too much for it!

I note that there are no howls from the sideline that Tiger will take over some Virgin flying unlike Jetstar/QF ....which they will..

Why bother sharing the burden of a loss making entity when you can shoulder the losses all on your own???
:ugh:

Singapore airlines posted a S$161 million charge over the $1 sale.

Couldn't possibly be the case, Rat. After all, he's the messiah.

Read Sandilands
 

Read Ben Sandilands' take on it. It seems there are two main drivers for this:

1) They no longer need to run two back-office operations to keep their accounts separate, potentially saving a few million.

2) Tiger then becomes an "Australian flag carrier" and is thus able to venture further afield. Apparently New Zealand and the Pacific Islands among others are very price-sensitive and would welcome the Tiger offering.

I've flown Tiger. It's like a Sydney bus: not very comfortable, but it gets you there. For short flights, why would you pay more?

I felt sorry for the poor sods trundling onto a Tiger flight in Cairns for a non-stop to Perth. But Sydney to Melbourne, why not?

With Jetstar retracting their preferential gates at SYD (saving $6m and APPARENTLY increasing the amount of command's in Sydney with no increase in aircraft numbers ... JQ pilots will know what saying..) Tiger are making their presence known. Where is Jetstar's big banner in T2?

Buying Tiger is win win for Virgin. Will the use the A320 to combat Jetstar 'a expansion into the mining sector?

40% for $1.
So 100% of Tiger is worth $2.50.
Interesting game this aviation business.

SIA just announced a full takeover of Tiger Airways Holdings by itself.

Not sure tiger is an Australian controlled airline even after the sale. Not sure what entity has bought the shares but there was a reason for the split virgin had given the shareholders.

Lucky Virgin, they now get 100% of Tigers losses :{

angry rat
maybe you are half right and half wrong.

He learned the good stuff: JQ/Tiger = how to undermine QF/VB respectively

But while they fight the 'ego contest' of who controls the domestic market, the winners will be - JB/AJ and budget travelers - the losers will be regular/business travelers and tech crew of VA/QF and of course the shareholders. JB earns more than most successful airline CEOs earn whilst he manages to turn a LCC into a loser!

But that is why they say we are 'down under' - our maths is different. Destroying Enterprise Value is obviously a positive in the BNE boardroom of VA!

Hope you don't mind a HK centric commentary on an Aussie issue - but I have mates in VA so hard for me to ignore!

Numero,
Yes, it's all very interesting isn't it?

I would have loved to have been a fly on the wall at the meetings preceding these decisions.

Nonetheless, I think a couple of our previous posters aren't too wide of the mark anyway.

We'll see.

quote


"Subdued leisure market with 90% loads? Seems pretty high ? :confused: "






high load factors don't mean profit. Many loss leader seats sold to fill aircraft.


Better loosing a few dollars on a seat, rather than a lot of $$$.




John McG-don't think u have actually flown TT. If u had u would note SFA difference between TT, JQ, VA & QF domestically, except for maybe baggage claim areas & TT's aircraft are newer, MUCH newer.




Can see abandoned routes such as DUD/SYD & DUD/MEL (although DUD/AVV might be better) + Hamilton & Palmerston North, all on a low frequency basis, such as twice a week, with maybe back of clock services, although fitting in with SYD curfew (2230 out of SYD, means early arrival in NZL, but better than no flights at all !!!!!!!)


Some mid week Australia to ZQN flights maybe be given to TT also.


Fiji is a given + maybe NOU & some pacific islands.


The losers will be Virgin New Zealand.


TT flights Australia to Fiji will create a low cost way to LAX at least in peak season.


Pax might fly TT to NAN, then FJ NAN/LAX. There are some very cheap fares NAN/LAX/NAN but hard part for budget travellers is often getting to NAN cheaply + the increased Fiji departure tax of around AU$120 each, which for a Australia/Fiji return on TT + a NAN/LAX/NAN on FJ, will mean 2 x $120 for each person + possible stay in Fiji for 1/2 day in each direction minimum.

I don't think Fiji is a 'given' at all. Particularly as JB has said he wants business class on the Fiji flights.

As for NOU, the reason Virgin don't fly there is the high landing charges (PB looked at it years ago & the landing charges made it unviable). And if costs prevent Virgin flying there, I don't think that Tiger will be going there any time soon.

As for Tonga, Samoa & Rarotonga, they might be able to offer a viable service to those destinations.

The Virgin Hamilton services were very full in the months leading up to the cessation of these flights. Now that doesn't necessarily mean that yields were good, however there were some rumours that the reason they were stopped was that Virgin felt they could make more money elsewhere with the aircraft.

quote


Quote:
Can see abandoned routes such as DUD/SYD & DUD/MEL (although DUD/AVV might be better) + Hamilton & Palmerston North, all on a low frequency basis, such as twice a week, with maybe back of clock services, although fitting in with SYD curfew (2230 out of SYD, means early arrival in NZL, but better than no flights at all !!!!!!!) Those routes were abandoned for a reason.

The Margin on the Tasman are already paper thin, with everyone relying on Alliances and connections to turn a profit. If there was money to made out of the larger regional cities, Virgin/Air NZ/Jetstar/Jetconnect... someone would (still) be flying them.
___________________________________________________________


which is why TT will do them & not VA/NZ.


Also look at routes like BNE/ZQN. VA/NZ do it nonstop up to 10 times a week & also year round (QF this year did it once a week for about 10 weeks only)


For those 3 days a week when 2 nonstop, who really want to depart on international 3 hour flight at 0500 ish, unless a very good reason to do so, such as $$$$.


When a family of 4, 5 or more people can save $100 or more each to fly that early they might, so why not have TT do it, with no business class, at much lower per seat costs.


Also to save $$$ some people will move their dates a few days.


Lastly, VA/NZ could put a majority of their frequent flyer seats on TT services. Those using ff pts/miles are used to compromise.


TT would be perfect for international services out of AVV.


Much cheaper car parking, cheaper fees for the airline.


Also look at Fiji.


VA currently has no opposition MEL/NAN/MEL during daylight hours. Only other MEL/NAN/MEL nonstop are FJ red eyes/evening flights, which don't connect with FJ to & from LAX. Similarly, VA does daily BNE/NAN/BNE in daylight hours. FJ only does 3 or 4 a week. The other FJ services are red eyes to NAN.


VA could therefore hand a few of their midweek flights to NAN from BNE &/or MEL to TT, or they can do what JQ are doing over Xmas holidays & run some flights back of clock.


VA will probably get much greater utilisation out of TT A320's, as they'll be able to offer flights west to PER which they already do & east to NZL & Fiji etc. which they don't do now.


Ask airports in NZL with no or stuff all service now from Australia, if they rather have red eye flights or no flights ?


Also ROT is losing their nonstop from Australia. Maybe they'd be better off with TT, than no flights at all.


From memory SYD/ROT was about twice a week.


The old Strategic/Air Australia route TSV/DPS which ran up to 3 times a week, could be reintroduced with TT operating it, as well as maybe TSV/AKL.


TSV people hate having to go to CNS or BNE to get anywhere international, as much as BNE people hate having to fly via Australia's worst airport, SYD.


Perhaps a TT, TSV/AKL could connect with NZ international services to LAX, SFO, YVR, RAR etc.

Good luck with an TT A320 making it on SYD-RAR, NZ currency does it twice an week with an 763 & that takes 7hours.

NZ doesn't work its rewards this way, NZ's rewards are anyseats rewards and you pay the going rate for your seat with points.

Use FF points on TT. Yeah, just ask the QF punters how much they enjoyed being punted onto Jetstar. Remind me again BNEA320, how much of YOUR money you'd be prepared to put into these ideas of yours?:rolleyes:

Tiger doesn't and won't offer connections, not even with themselves. Tiger Singapore connects with Scoot. With SIA having majority interest in Virgin (and probably behind all these Tiger deals), you might see Tiger Australia connecting with Scoot.

Forget Bali. AirAsia X Indonesia is about to do flood the market. Perth to Bali is within range but you are up against AirAsia with half a dozen flights, why bother.

Nadi might work, Christchurch another possibility. Don't forget Tiger only has three bases, MEL/SYD/BNE.

Samoa won't happen, Virgin has a contract with the Government.

Forget new routes, they clearly stated its all about Tiger picking up Virgin routes. Its all about Virgin exiting these routes, Tiger going in, picking up the traffic and making money of the current traffic, rather than building up new routes which can take years to make any money.

JohnMcGhie -How many years ago was that? The only airline now flying non-stop CNS-PER or PER-CNS is JQ. I flew JQ PER-CNS 6 weeks ago and there's little difference between JQ and TigerAir. I also flew TigerAir CNS-BNE 2 weeks later, and the experience was little different to JQ. They both largely run late, they both suffer from disorganisation, and they both give pax the bare minimum. On the JQ flight PER-CNS, we weren't even offered water - not even to buy.

I must grudgingly admit, the JQ flight PER-CNS was on time (1st time ever, in my JQ experience), but I would also guess being a full-on red-eye flight, helped in that regard.
I flew with QF, BNE-PER a couple of weeks later again, they were 2 hrs late, and we had bugger-all entertainment, thanks to the use of a former JQ Airbus (the Capt did actually apologise for the lack of entertainment due to an upgrade that is well behind schedule, apparently).

I've flown VA, TT, JQ and QF, multiple times in the last year and I'm getting about the same level of treatment from all of them. There's some pretty ordinary levels of performance in the airline industry currently.
I'm having trouble actually remembering the last time I flew where I really enjoyed the flight, where it was on time, and where there wasn't some level of disorganisation.

Australian domestic airlines are in a race to the bottom as far as the customer is concerned, trying to outdo each other as to who is the cheapest and nastiest.

Soon it will be just like the USA with all their airlines except jetBlue scoring a 3* Skytrax rating.

Well it won't be Raro... A320 would have to do Aust-AKL-RAR, then overnight the crew. VANZ don't overnight due costs... so what are the chances TT would?! I would hazard a bet that VANZ crew are probably a hell of alot cheaper than Aust based TT crew.

Same with Tonga, it would have to be a return out of Aust, but then there would be no AKL-Tonga connection unless you overnight AKL. But AKL ain't cheap for overnights, almost on par with BNE cost wise.

Samoa is a closed shop with Virgin Samoa. Why would you cannibalize your own market on that route? Once biz class comes to that route, it would probably be like the old Poly days. Samoan Government very happy...

There were rumors of Jet* starting a Samoa route or RAR route.

As far as VANZ being losers in this.. the evidence does not back this up. Integrated into VAI, and the NZ bases aren't going anywhere. Business class coming to the Tasman next year. Crew numbers are stable, recruiting within the group now for replacements. Everyone going through VAI integration sim training and ground courses. No redundancies from line tech or cabin crew. Different story for management. Yes with biz class, you expect your aircraft to earn more for the outlay so marginal routes will be axed quicker. But you still need to be flying those aircraft.

Nadi services are now "full service" with a "meal" included just like Bali. VANZ might lose a few Fiji services, but I would say it's a safe bet that they do not want to pull VANZ off the routes because it competes with Fiji Airways full service product. I would expect to see TT on the SYD-NAN route to compete with Jetstar's service.

I'm also guessing to see TT Aust service the PER/DRW-SIN route connecting to the greater TT South East Asia network.

As for Palmy North / Hamilton.. who knows. Low cost worked in those places once, aka Freedom. It depends on what Uncle Koru has to say about it considering they have a 26% share and a board seat in the whole kaboole.
The Tasman though is a bloodbath. 13 odd carriers battling it out. You need to either have a really good product (Emirates, Air NZ), be real cheap (J*) or fly city pairs that have a point of difference like ZQN (Jetconnect/VANZ)

Air NZ are pulling out because the ROT council refuses to keep it's $1 million NZD subsidy to Air NZ, citing that the money is better spent elsewhere.

Rotorua to Sydney flights canned | Stuff.co.nz

Similar thing happened to HLZ, apparently there are 5 or so councils that have a share in HLZ airport. Only two wanted to keep paying the Virgin the subsidy to keep flying in hence why services pulled.

15L - you're on the money.

320- I think you're getting a bit excited. VANZ has a lower cost base than TT, esp now under Vai. Anz and Virgin also have obligations not to decrease Tasman flying.

I think 15L is correct. You will see TT do some additional Fiji work to keep jq in their place and from attacking virgin from behind. Also a few Tasman leisure routes, so may Sind dud, Chc. Bne, ool. But any decrease by VANZ has to be put elsewhere on the Tasman.

TT likely to Bali also but in tandem with vai.

Anyway you cut it, Australia can and should only support two airlines. That's the only way for it to be profitable. And no I don't mean gouging the public.
The unfortunate component is the multitude of levels of management, including accountants, economists, lawyers, and analysts that think they are justified in this mess, that makes up the definition of senior management within this country.

The only way TT will do Bali, is from Perth. Then, at the bottom of the pile you're competing with Air Asia. And you can't.

Or from ADL and DRW.

I am sure VA would want to retain a Business Class option on DPS flights as it is fairly popular and apparently mostly nearly full. Replacing these flights with Tiger would be self-destruction on VA's behalf. Tiger would be a last choice for most people, the damage to their reputation has already been done.

There are some very upmarket resorts and villas in Bali, so not everyone travelling there is a 'bogan' looking for a LCC, money to be made full service and with J class product.

True, there are lost of corporate jets flying in to Bali, which explains why Ngurah Rai airport recently built a Business Jet apron and terminal on the south side of the runway.

TT's reputation isn't damaged. It's all in the minds of QF staff !!!


Grounding was very dodgy.


Plenty of people fly TT & find stuff all difference from JQ, VA & QF domestically.


Believe what you want, at your peril.

QF punters would rather get a ff ticket on any airline, than no ff ticket.
TT will take over VA loss making routes & loss making days of the week, freeing up VA aircraft.


Look at SYD/HNL. QF & JQ both do it.

TT will use VA back office & will therefore have much lower costs than anyone else in the region !!!


They may even use Menzies staff at airports. Am sure that VA will get a better deal for check in staff, handling, if doing all VA/NZ/TT on one contract.

Menzies don't hold any GHA contracts for any of the aforementioned airlines bar toilet and water for VA.

I would keep a keen eye on TLS...

Or maybe.........A330's.....

Good luck folks...this has all the makings of another QF/JQ.

I sincerely hope for those at VA that it does not turn out the same way. There is nothing worse than seeing the aircraft you used to fly being transferred to another entity, leaving you short of hours.

When will this madness end

I don't think we will see the same as a VA/TT like the JQ/QF pilot thing as they are so close in conditions. Minor things in each owns EBA may need to be re-shuffled but overall not a great deal compared to the QF group. Also it would appear that the pilot groups under the VA banner are more flexible to change with the current and unpredictable aviation environment which when chasing work and contracts may see them increase their yield.
As the above articles that I have read do not show a decrease in airframes it would also appear that the current pilots jobs at all VA airlines are somewhat secure at this time. What type or base you are on/ in is a different story which is how the industry is at this low point. Once things pick up again in time no doubt that will change. As has always been said before if you don't like it leave or change, but remember all those beers and wines you have thinking/ worrying/ contemplating this industry keep people in jobs of other industries so there is always some good out of a frustrating situation.
Love to fly but hate the industry, enjoy a red instead
Nig

Brilliant strategy.
Keep Qantas in the dark, forcing them to keep the loss making JQ international up and running to cover the threat of tiger jumping in the market. Borghetti would be crazy to actually do it, but why not announce "we could do anything" just to make JQ jump at shadows...