Australian competition regulators have approved Virgin Australia’s bid for 60% of loss-making low-cost carrier Tiger Airways Australia.
The Australian Competition and Consumer Commission said Tiger was unlikely to remain in the country without Virgin’s involvement.
Tiger Australia, owned by Singapore-based Tiger Airways, serves 16 domestic routes in the country with 11 aircraft.
The deal will allow Virgin to better compete with Qantas offshoot Jetstar.
Commission chairman Rod Sims said: “The ACCC’s view is that this acquisition is unlikely to lead to a substantial lessening of competition in the Australian market for domestic air passenger transport services.
“Essential to reaching this view was the ACCC’s assessment, made after thorough and extensive testing of the issue, that Tiger Australia would be highly unlikely to remain in the local market if the proposed acquisition didn’t proceed.
“In making this assessment the ACCC had particular regard to Tiger Australia’s history of poor financial and operational performance.
“In six years in Australia, Tiger has never made an operating profit, and its current losses are large. These losses remain a big drag on the entire Tiger group,” Sims said.
“The ACCC would always prefer to see a greater number of independent airlines competing in the domestic market. However, our investigations showed that Tiger Australia had been unable to establish itself as a viable competitor despite substantial investment and numerous changes of management and strategy over the years.
“We concluded that it was highly likely that Tiger Australia would leave the market if this acquisition didn’t go ahead, and accordingly blocking the acquisition would not serve to protect competition.
“Virgin Australia now has the opportunity to pursue its stated objective of transforming Tiger Australia into an effective competitor to Jetstar for price sensitive travellers.”
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