UPDATE 1-Singapore Airlines ups pressure on Qantas with Virgin Australia stake

Mon Oct 29, 2012 7:11pm EDT

Related Topics

* Virgin says three deals will boost its domestic competitiveness

* Singapore Airlines seen gaining exposure with 10 pct Virgin stake

* Virgin to acquire 60 pct of Tiger Australia, 100 pct of Skywest (Adds analyst comment, details)

MELBOURNE, Oct 30 (Reuters) - Virgin Australia Holdings Ltd said alliance partner Singapore Airlines will buy a 10 percent stake for A$105 million ($108 million), helping it compete with Qantas Airways in the lucrative Australian market.

Seeking to consolidate its domestic position, Virgin also agreed to provide a lifeline for Singapore's struggling Australian budget unit, by agreeing to acquire 60 percent of Tiger Australia for A$35 million.

Singapore will join unlisted Etihad Airways, Abu Dhabi's flag carrier, in taking a minority equity stake in Virgin.

The series of announcements on Tuesday by Virgin to help shore up its position follows Qantas' proposed alliance with Dubai's Emirates, announced last month.

"Qantas' ambition to become a premium player in the Asia Pacific aviation market is meeting some stiff resistance, most notably from other key players in the region like Singapore Airlines," said City Index analyst Peter Esho.

"We see today's move by Singapore Airlines as a strategic shift down south to back Qantas' main domestic competitor," he said.

Under the agreement, a placement of 245.6 million shares will be made to Singapore Airlines at an issue price of A$0.4288 per share.

Virgin and Tiger will also jointly invest a further A$62.5 million to increase Tiger's fleet size.

Virgin also said it would acquire 100 percent of regional airline Skywest, which services fly-in fly-out mining camps, for A$0.45 per share.

"The transactions announced today are in line with Virgin Australia's strategy to become the airline of choice in all markets, in order to diversify our earnings and drive growth opportunities for the business," said Virgin Australia Chief Executive Officer John Borghetti. (Reporting by Victoria Thieberger; Editing by John Mair)

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