Tiger Airways sells Philippine business to Cebu Air

MANILA - Tiger Airways Holdings Ltd said on Tuesday it would sell its entire 40 percent stake in its Philippine business, with the country's largest budget carrier Cebu Air Inc taking over in a further consolidation in domestic carriers.

The two airlines have yet to disclose the pricing of the deal, in which Cebu Air, operator of Cebu Pacific, will acquire 40 percent of Tigerair Philippines from Tiger, and 60 percent from Tiger's Philippine partners.

The such deal in the Philippines, following AirAsia Bhd's buy-in of unlisted Zest Air last year, should bode well for the country's airline sector, analysts say.

"The aviation market in the Philippines is overcrowded and largely unprofitable, except for market-leader Cebu Air. The deal will allow Cebu Air to solidify its market position,"Raymond Yap, analyst at SB Equities Inc, said in a research note.

Cebu Air's takeover of Tiger Philippines will allow it to raise its share of slots by about 10 percent in Manila's crowded runways and limited terminal capacity, Yap said.

Cebu Pacific is the country's largest airline, with a market share of about a third compared with Tiger's estimated 4 percent.

Tiger Airways has struggled to make headway because of its small operations locally and "irrational pricing" by rivals, Yap said.

Shares of Cebu Air climbed 1.02 percent in early deals on Tuesday while Tiger Airways fell nearly a percent.

Cebu Air's shares are unlikely to gain much from the deal, with investors concerned higher fuel prices could hurt the airline's margins and overall profitability, said Gregg Ilag, analyst at brokerage firm AB Capital Securities in Manila.

Cebu Air said in a joint statement the alliance with Tiger will allow it to fly to high growth markets including Australia and India, with the two airlines to jointly operate and sell common routes between Singapore and the Philippines.

However, the alliance will strengthen the two carriers'domestic presence more than its regional market share, some say.

"This alliance will be a threat only on the domestic front, particularly to Philippine Airlines. I think the international route is still more favourable for AirAsia given their network," Ilag said.