Virgin Australia to Buy Tiger Airways for US$0.88

Virgin Australia Holdings Ltd. (VAH) plans to buy the loss-making Tiger Airways Holdings Ltd. for A$1 (U.S. $0.88).

Virgin Australia's Sankar Narayan said that the deal was "fundamentally about fast-tracking the business to profitability." "This is the quickest way that we can get Tiger on a break-even proposition."

Virgin had paid around $30.65 million in 2013 for a 60 percent stake in the Singapore-listed budget carrier. In a regulatory statement, Virgin said Friday that it was looking forward to operate the brand while curbing any new additions to the loss-making unit's fleet, Bloomberg reports. It will take full control in a bid to expedite the process of a turnaround.  

"We will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016," said chief executive John Borghetti, BBC reports.

The Tiger group is owned 40 percent by Singapore Airlines Ltd. and has failed to make a full-year profit since 2011. In 2011, after a pilot flew an aircraft too low approaching Melbourne airport, the Australian unit of the airlines was suspended from operating its domestic flights for six weeks.

Virgin said that its share of Tiger Australia's losses in the three months through September was an approximate $10.14 million.

Virgin Australia ranks second in the domestic air travel market. This deal can strengthen its position to take on the No. 1 Qantas Airways Ltd. The two airline companies have been locked in a battle to rule the domestic market for years now. At present, Qantas has around two-thirds of the domestic air travel market, The Wall Street Journal reports.

Virgin further informed that the takeover is subject to regulatory approval and will be completed by the year-end.