SIA acquisition of Tiger Airways cleared for takeoff by competition watchdog

SINGAPORE - The Competition Commission of Singapore (CCS) on Friday cleared the proposed acquisition of Tigerair Holdings by Singapore Airlines (SIA).

CCS concluded that the transaction would not infringe the Competition Act as Tigerair is likely to exit its operations without the acquisition. 

SIA currently holds 40 per cent of shares in Tigerair. If the transaction goes through, the national flag carrier will raise its stake in the ailing budget carrier to 56 per cent, making Tigerair a subsidiary of SIA. 

While SIA had earlier said that it has no plans to fully takeover Tigerair, it did not rule out the possibility of such a move in future. 

The watchdog said in a statement today that it "would be less detrimental to competition in Singapore as compared to the scenario where Tigerair exits its operations". 

"Without the proposed transaction, the consequent exit of Tigerair would cause disruptions to passengers and to connectivity of Singapore's air hub," CCS added. 

In its competition assessment, CCS compared the effects of the proposed transaction to that of an exit of Tigerair without the acquisition. After reviewing the parties' submissions and feedback from competitor airlines, third party channels for ticket sales, end customers and relevant stakeholders such as the Ministry of Transport, the Civil Aviation Authority of Singapore and Changi Airport group, CCS has found that, among the 41 passenger air transport routes affected by the Proposed Transaction:

(i) there are 4 routes (between Singapore and Thiruvananthapuram, Bandung and Phnom Penh) where Tigerair Holdings has already exited its operations or announced an exit in the near future (Singapore - Perth). The transaction will not reduce the number of competitors along these routes;

(ii) there are 12 routes (between Singapore and Haikou, Lijiang, Ningbo, Lombok, Tiruchirapalli, Yogyakarta, Macau, Kuching, Clark, Colombo, Hat Yai and Krabi) that are only operated by Tigerair but not SIA. The transaction will not reduce the number of competitors along these routes;

(iii) there are 5 routes (between Singapore and Male, Hyderabad, Kochi, Bangalore and Chiang Mai) where the merged entity would be the only remaining operator of the routes. However, without the proposed transaction, the likely exit of Tigerair would also leave SIA as the only remaining operator. Therefore, the transaction would not lead to a worse outcome for competition on these routes;

(iv) there are 3 routes (between Singapore and Jakarta, Surabaya and Kalibo) where the post-merger market concentrations do not exceed the indicative thresholds under CCS guidelines. CCS said it does not have significant competition concerns over these routes;

(v) there are 12 routes (between Singapore and Kuala Lumpur, Denpasar, Hong Kong, Manila, Yangon, Bangkok, Guangzhou, Phuket, Chennai, Ho Chi Minh, Shenzhen and Taipei) where CCS estimates that other competitors have sufficient excess capacities currently to mitigate the risk of any potential increase in airfares by the merged entity;

(vi) there are 3 routes (between Singapore and Langkawi, Cebu and Hanoi) where neither SIA nor Tigerair is the largest player. Without the proposed transaction, the likely exit of Tigerair on these routes would divert some passengers towards the largest player, thus resulting in even higher market concentrations as compared to the post-merger scenario. Therefore, the  transaction would not lead to a worse outcome for competition on these routes;

(vii) there are 2 routes (Singapore - Penang and Singapore - Dhaka) where some degree of competition concerns exist, although there is no regulatory constraint in terms of air traffic rights or airport slots for competitors to increase capacities through mounting new flights.

maryanns@sph.com.sg