ACCC Delays Virgin Takeover of Tiger

18th Feb 2013

The Australian Competition and Consumer Commission (ACCC) is delaying its decision until mid-March on the matter in which Virgin Australia is planning to take control of Tiger Airways.

The postponement will give Tiger ample time to reconsider its plans for complete takeover by its major stakeholder, Virgin Australia. It said that they will hopefully make their final decision by middle of next month (14 March) as soon as their market inquiries are done towards the end of February.

The agency is very careful on its decision as the interest of the riding public is at stake here. A positive decision would bring the country back to airline duopoly.

Moreover, ACCC has published a paper on the "statement of issues" which offers preliminary views by the agency so that the public may be able to know its position on the matter.

A number of concerns were raised by the agency on the paper including the possibility of the airline's dissolution shall the deal fell through, whether Virgin slashes ticket costs to lure Tiger customers and whether air travelers will benefit should an airline duopoly returns.

Would Tiger fold without Virgin investment?

One vital issue ACCC is concerned about is whether Tiger Airways will eventually fold up its operations in the country sans a successful deal with Virgin. The agency has solicited the public's opinion on whether:

- Tiger Airways will end its operations and leave Australia

- Tiger Airways will keep its operations in the country under the same owners and, if so, the type and size of its operations

- Another investor will show interest in acquiring a stake in Tiger, and if so, the size of that stake and its significance to Tiger Australia?s operations within the country

- Virgin Australia will set up its own budget airline operating under a different brand.

Would Virgin pull Tiger's discount claws?

The agency understands that Tiger customers benefit from the airline's low airfare within Australia and that should the merger get finally approved, with Virgin taking control of the former, domestic air travelers in the country will lose those benefits.

ACCC acknowledges that the two are currently rivals with Virgin serving 11 out of 12 routes served by Tiger Australia. The agency isn't convinced by Virgin's claim that they aren't competing with Tiger anymore since they dropped its old name (Virgin Blue) to become Virgin Australia.

During off-peak periods, ACCC notes, demand is low and Virgin Australia may find it hard to fully utilize its capacity. During these times, Virgin would find its operation more profitable if they sell discounted fares to lure customers away from either budget carriers (Tiger Australia and Jetstar).

Back to two choices for flying within Australia?

According to its CEO, John Borghetti, Virgin won't attempt to transfer business travelers between the two carriers. He assured that Tiger Australia would remain a completely separate entity with its own board and it will remain a low-cost airline as it has been. He added that Virgin will never dip its fingers in Tiger's internal affairs.