The national airline, which owns around 40 per cent of Tigerair, will be injecting up to S$140 million in the loss-making budget carrier. This will be done via a subscription to Tigerair’s rights issues and converting perpetual convertible capital securities (PCCS) into ordinary shares of Tigerair, and will bump SIA’s stake up to approximately 55 per cent.
The Competition Commission of Singapore (CCS) in October sought feedback on the proposed acquisition of shares by SIA. If the deal goes through, it would make Tigerair a subsidiary of SIA, on top of the national carrier’s low-cost airline Scoot.
Said Mr Goh Choon Phong, Chief Executive of Singapore Airlines: “We are applying to the Competition Commission of Singapore for merger control. And if that is approved, we could actually gain control of Tiger.
“That means that we could have our proportional Board representation in all that. And with that, I think the Group can actually bring to bear its considerable resources to help Tiger.”
SIA told Channel NewsAsia that the relationship with Tigerair will be one of collaboration, even as the move allows the budget carrier to tap the former’s resources to turn its fortunes around.
In taking Tigerair under its wing, the national carrier is hoping to replicate the success it has had with SilkAir. Over the past three years, connecting traffic between SIA and SilkAir jumped by 50 per cent.
Meanwhile, on the cards for Tigerair is greater integration with Scoot and both entities are working out the details, SIA said. These may include the sharing of common routes, which means passengers can potentially fly to destinations via integrated Scoot-Tigerair connections. Currently, connecting traffic between Tigerair and Scoot is significantly below 5 per cent, according to SIA.
There could also be integration in other areas, such as ground-handling.
Mr Greg Waldron, Asia managing director of Flightglobal, noted: “There could be synergies around stuff that is behind the scenes, where the Group carriers could work together to save costs, in areas such as catering.”
SIA added that keeping Tigerair in its portfolio will allow the national carrier to access all segments of the travel market.
However, there is also the view that Tigerair needs internal fixing first.
“They really did not get a handle on their core business of budget airlines, and then they expanded into Indonesia and Australia and so on, which I think was a bit too premature. So you have to build the foundation of the house first before you build a tall building,” said Associate Professor Nitin Pangarkar, from the Department of Strategy and Policy at the National University of Singapore.
Tigerair has been restructuring its operations to turn the skies around and it has largely withdrawn from Indonesia and Australia.