Virgin Australia cashes up to mount Qantas challenge
Airline sells 10 per cent stake to SIA and seeks control of two rival operators in Australia
Virgin Australia sold a 10 per cent stake to Singapore Airlines and sought control of two local rivals, creating the biggest challenge to Qantas Airways' market leadership in more than a decade.
SIA will spend A$105 million (HK$844.5 million) on new Virgin shares, according to a statement yesterday. Virgin will pay at least A$35 million for 60 per cent of budget carrier Tiger Airways' Australian unit and would bid for all of regional operator Skywest Airlines.
Virgin chief executive John Borghetti is building on a strategy of alliances that already includes investments from Etihad Airways and Air New Zealand.
The move adds to pressure on Qantas, which has linked up with Emirates in a bid to end losses on international routes.
"They're going to give Qantas a run for their money," said Simon Fitzgerald, an analyst at Moelis. Borghetti "is making really well thought-through strategic moves with this company. He's not sitting back waiting for things to happen".
Buying control of Tiger Australia will give Virgin a budget brand to compete with Qantas' Jetstar and bolster its operations on Australian east coast routes where competition has driven business-class ticket prices to 20-year lows.