* Tiger Airways sells its 40 pct Tigerair Philippines stake
to Cebu Air
* Cebu Air to buy remaining 60 pct from Tiger Airways'
* Deal is second act of consolidation in the Philippines in
(Adds comments from company officials, market context)
By Rosemarie Francisco and Anshuman Daga
MANILA/SINGAPORE, Jan 8 Singapore's Tigerair is
selling its Philippine business to Cebu Pacific, the
archipelago's biggest airline, leaving just three main players
in a market flush with planes but thin on passengers.
Tigerair, which has lost millions of dollars since buying
into the budget carrier about 18 months ago, is turning its
attention to partnerships to build scale. Cebu Pacific is
betting on longer-term growth to propel traveller numbers beyond
Tiger Airways Holdings Ltd, 40 percent-owned by
Singapore Airlines Ltd, said on Wednesday it will sell
its 40 percent stake in Tigerair Philippines to Cebu Air Inc
, operator of Cebu Pacific.
That will leave Cebu Air, a unit of conglomerate JG Summit
Holdings Inc, with one less competitor. It separately
said it will buy the stake plus the remaining 60 percent of the
budget carrier from Tigerair's local partners for $15 million.
Tigerair estimates proceeds of $7 million.
This would be the second instance of consolidation in less
than a year after the Philippine unit of Malaysia's AirAsia Bhd
bought 49 percent of Zest Airways in March. AirAsia
increased its spending on Zest in September to relieve financial
stress at the small airline.
The number of available seats on Philippine planes will soon
outnumber passengers, prompting airlines to cut prices to gain
"I think it (pressure on fares) is a reflection of the
fierce competition within the Philippines," Lance Gokongwei,
chief executive and president of Cebu Pacific, told reporters in
a conference call.
"Our feeling is that the Philippine economy continues to
grow at a pretty strong clip and if we have overcapacity at the
moment, over time the growth of the market will more than
compensate for this."
Tigerair Philippines has been losing money since Tigerair
completed the purchase of its 40 percent stake in 2012. As of
Sept. 30, Tigerair had written off its cumulative share of
losses and impairments of S$84 million ($66 million) in its
Philippines operations since August 2012.
Shares of Tigerair fell nearly a percent on Wednesday in a
firm market. Cebu Pacific rose 3.5 percent in a broader
market which rose 0.7 percent.
Tigerair, after selling the stake, will collaborate both
commercially and operationally with Cebu Pacific on
international and domestic routes, thereby creating the biggest
network of flights out of the country.
"Indeed, scale of operations is important and that includes
both real and virtual scale as well. We believe that getting
into partnerships and alliances will give us virtual scale that
will yield similar benefits as well," said Koay Peng Yen, chief
executive of Tigerair.
"This new partnership with Cebu Pacific is an expansion of
that strategic thinking that we have."
Cebu Pacific said the alliance will enable it to fly to
high-growth markets such as Australia and India, and jointly
operate routes between Singapore and the Philippines.
"At this point, they (Tigerair) do not have flexibility or
the firepower to increase the number of planes, so they are not
looking at increasing connecting cities through increased
frequencies on Tigerair," said Sagar Ashok, a Kuala Lumpur-based
aerospace consultant at Frost & Sullivan.
"So, they would be looking at these kinds of arrangements
where they fly in with other carriers."
Last month, Tigerair turned its attention to budget air
travel in North Asia, saying it will hold 10 percent of Tigerair
Taiwan, a new joint venture with China Airlines Ltd.
Tigerair also formed an alliance with Indian budget airline
SpiceJet Ltd and partnered with Scoot, a medium and
long-haul low-cost carrier owned by Singapore Airlines.
"The aviation market in the Philippines is overcrowded and
largely unprofitable, except for market-leader Cebu. The deal
will allow Cebu to solidify its market position," said SB
Equities analyst Raymond Yap in a note.
Cebu Pacific controlled about 51 percent of the domestic
market in July-September, followed by PAL Holdings Inc's
Philippines Airlines group with just over 35 percent,
the Centre for Aviation said in a report, citing government
data. AirAsia-Zest Air held 9 percent while Tigerair Philippines
held nearly 5 percent.
Tigerair Philippines averages 118 flights weekly with five
aircraft to 11 domestic and international cities. This compares
with Cebu Pacific's 2,200 flights, 48 aircraft and 24 overseas
and 33 local destinations.
($1 = 1.2717 Singapore dollars)
(Additional reporting by Erik dela Cruz; Editing by Christopher