Singapore Airlines Ltd. has expressed its desire to purchase the remaining shares of Tiger Airways Holdings Ltd. and completely delist the latter. Southeast Asia’s largest carrier announced that it intends to pay $0.41 for each share, and it intends to pay everything in cash.
Singapore Air's decision comes as a surprising one since the amount it is willing to pay per share is not even close to Tiger Airway's initial public offering price of $1.60 back in Jan. 2010, as per Bloomberg.
Singapore says it wants to enhance operations across the group's network so it plans to buy the remaining stocks of Tiger - the ones which are not part of the 55.8 percent it already owns as of June, The Malay Mail Online has learned.
The expansion of budget carriers has become very rapid as of this time since Asians experience rising incomes that enable them to fly and travel for the first time.
However, there are challenges that these carriers continue to face. The tight competition amid the inadequate infrastructure actually takes a toll on how airlines engage in a jet-buying frenzy for the past five years.
Tiger Airways has also a five-time streak of losses in the past six quarters, so it is not surprising that it is the target of companies for a buyout despite its efforts to reorganize its business.
"Tiger Air has been restructuring operations by cancelling loss-making routes. By doing so, earnings are at an inflection point. This a tactically well-timed move for Singapore Air," Samsung Asset Management Ltd. money manager Alan Richardson said.
In hopes of helping Tiger Airway's financials last year, Singapore Airlines increased the budget carrier's stake, but in the process it ended partnerships in Indonesia, the Philippines and Australia. It also reduced capacity and cut routes.
"Tiger Airways' development potential is limited without deeper integration with the SIA Group to build a strong foundation for growth over the long term," Singapore Airlines CEO Goh Choon Phong said in a statement.
The news comes after Singapore Airlines saw a jump on its profit amid its improved businesses and lower fuel costs.
According to AirWise, Singapore Airlines earned $170 million in the six months leading to Sept. 30. The figure is actually 40.4 percent higher than the profit it earned same time last year.
The airline said that since the average jet fuel prices were lower by 41.1 percent compared to the previous year, this enabled the company to see a significantly increased net profit from a year before.
Singapore Airlines finally said on Thursday, "Uncertainty in economic conditions persists, exacerbated by concerns about China's slowing economy, which have led to weakening emerging-market currencies and volatility in stock markets. The outlook for both passenger and cargo traffic is cautious."
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