Follow Philippines Investment Immigration for Philippines economic news: Recently, Cebu Pacific will acquire Tigerair Philippines, and this acquisition will help strengthen Cebu Pacific's position in the domestic market, preparing for AirAsia's challenge in the Philippines.
Tigerair will ally with Cebu Pacific and sell its 40% stake in Tigerair Philippines to Cebu Pacific for $7 million (S$8.93 million).
Cebu Pacific operates the largest low-cost airline in the Philippines—Cebu Pacific Air. Analysts point out that this is the second acquisition in the Philippine aviation industry in a year, and the domestic aviation market in the Philippines is overcrowded, with all operators other than Cebu Pacific unable to turn a profit.
On January 8, Tigerair announced that its wholly-owned subsidiary Roar Aviation II Pte Ltd has signed a share sale agreement with Cebu Pacific to sell the aforementioned stake for S$8.93 million. This subsidiary will nominate Cebu Pacific to acquire the remaining 60% stake in Tigerair Philippines from all other shareholders.
Tigerair's wholly-owned subsidiary Tigerair Singapore has also signed a strategic alliance agreement with Cebu Pacific for extensive cooperation, including jointly operating common routes between Singapore and the Philippines. As both networks expand, other market joint venture opportunities may arise. Both parties will also jointly sell and market common and non-common routes, as well as collaborate in marketing, airport operations, ground handling, scheduling, pricing, service policies, innovation, procurement, and more. This strategic alliance will take effect after the completion of the aforementioned sale transaction, which is subject to approval by the Singapore Competition Commission.
Tigerair announced in mid-2012 that it would acquire a 40% stake in Tigerair Philippines through its wholly-owned subsidiary Roar Aviation II Pte Ltd for approximately $7 million (S$9 million), but to date, Tigerair Philippines has not been able to achieve profitability, with its book value equivalent to zero as of the end of September last year.
Roar Aviation II has lent S$84.5 million to Tigerair Philippines, and these loans will convert into paid-up capital for Tigerair Philippines before Cebu Pacific pays for the 40% stake. Tigerair stated that the sale transaction will result in a net loss of S$13.5 million on this investment.
Tigerair Philippines is based in the Philippines, operating domestic aviation services, as well as international aviation services between the Philippines and Singapore, Hong Kong, and Thailand.
Tigerair stated that as part of the group's business growth strategy, the company has been exploring various cooperation options. Just as the company currently collaborates and allies with Scoot, the commercial cooperation between Tigerair and Cebu Pacific will be mutually beneficial. The cooperation between Tigerair and Cebu Pacific on domestic and international routes will create the largest aviation network for travel between the Philippines and the region.
By pooling resources, Cebu Pacific will be able to leverage Tigerair's network in Asia to enter new markets and provide flight services, while Tigerair will be able to transport more passengers to more cities in the Philippines through Cebu Pacific's comprehensive domestic network. If approved by regulatory authorities, this alliance will allow both parties to consolidate common routes, providing customers with more options.
Cebu Pacific holds one-third of the domestic aviation market in the Philippines, while Tigerair holds 4%. Analysts believe that this acquisition will help strengthen Cebu Pacific's position in the domestic market, preparing for the challenge from AirAsia. Last year, AirAsia acquired Zest Air, which is the third-largest airline in the Philippines, following Philippine Airlines and Cebu Pacific Air.
Tigerair announced that its wholly-owned subsidiary Roar Aviation II Pte Ltd has signed a share sale agreement with Cebu Pacific to sell the aforementioned stake for S$8.93 million. This subsidiary will nominate Cebu Pacific to acquire the remaining 60% stake in Tigerair Philippines from all other shareholders.
