Tigerair Announces Virgin Saviour

Ser Jing - Tigerair Announces Virgin Saviour (pic)

Earlier today, airline Tiger Airways Holdings (SGX: J7X) announced the completion of a 60% sale of its Tiger Airways Australia subsidiary to Virgin Australia – part of the British billionaire Richard Branson’s sprawling conglomerate Virgin Group – for a previously announced sum of A$35m. The completion of the sale takes place after almost 8 months since the sale-idea was first proposed on 30 October 2012.

Tiger Airways, now known as Tigerair after a rebranding that took place a few days prior to this sale-announcement, is looking for Virgin Australia’s support  to help turn its operations around.

Regarding the sale, Tigerair’s management commented in the company’s earnings release for the quarter ended March 2013 that “[after the sale], Tiger Australia will be better-positioned to tap opportunities for further expansion in terms of network and market reach. The transaction will also create operating synergies and better cost efficiency for Tiger Australia”.

Tigerair’s Australian operations have been poor lately, turning in a combined annual operating loss of S$145.8m for the financial years ended March 2013 and March 2012. Indeed, the Australian Competition and Consumer Commission (ACCC) have stated that Tiger likely wouldn’t survive in Australia for much longer had the Virgin deal not gone through.

With this sale, investors in Tigerair would be looking for a turnaround in the airline’s fortunes. The airlines’ last two completed financial years brought loses of S$45m and S$104.3m which must have factored into the airline’s shares poor showing over the past 24 months.

In that time, Tigerair’s shares have tumbled by 40% to its current price of around S$0.63. In contrast, the Straits Times Index (SGX: ^STI) had remained at essentially the same level of 3,150 points now as it did 2 years ago.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.