SINGAPORE - The partnership between the Singapore Airlines (SIA) family and Virgin Australia is on a roll as they take on the Qantas group in its own backyard.
A day after regulators allowed Virgin Australia to buy a controlling stake in Tiger Airways Australia - an SIA associate - SIA said it is buying another 9.9 per cent of Virgin Australia itself.
This raises its interest in the Brisbane-based airline to 19.9 per cent.
SIA said it will purchase 255.5 million shares from Virgin founder Richard Branson at 48 Australian cents per share, for A$122.6 million (S$155.9 million) in all. The price per share carries a 5.5 per cent premium to Virgin Australia's traded price on Tuesday.
The transaction values the Virgin Group at A$1.2 billion, compared to Qantas's market capitalisation at A$4.2 billion.
Some analysts see the move to gain greater control as a pre-emptive measure against share dilution, in the event that another player wants a bigger bite of the Virgin Australia pie. Etihad Airways, with its 8.6 per cent stake, is one possible candidate; it has made no secret of the fact that it intends to raise its holding in Virgin Australia.
Other analysts saw the move as SIA cementing its existing relationship with Virgin Australia.
CEO of SIA Goh Choon Phong said: "It...demonstrates our support for the ongoing transformation of Virgin Australia, which has created a more competitive aviation market in Australia."
Faced with increasing competition, SIA is trying to grow its position and boost profitability in the high-growth Asia Pacific, including Australasia.
These include taking a bite into the potentially lucrative medium-haul budget market via Scoot (which flies to Sydney and the Gold Coast); boosting the footprint of its regional carrier SilkAir; and upping its involvement in Tiger Airways. It recently subscribed for its pro-rata entitlement of 53.7 million rights shares in Tiger Airways, which if fully converted, raises its stake in Tiger to 46.5 per cent, from its current one-third.
Wednesday's announced purchase will make SIA the joint largest shareholder in Virgin Australia, along with Air New Zealand which owns a matching stake. The Virgin Group owns 13 per cent of the carrier.
Air NZ, in a stock filing on Wednesday, said it has topped up its shareholding to maintain it at 19.9 per cent, debunking market talk that its stake has been diluted by the share issuances to SIA and West-Australian airline, SkyWest.