Singapore Airlines lifts stake in Virgin Australia to 19.9 percent

SYDNEY Wed Apr 24, 2013 11:57am IST

An Airbus A380 jet of Singapore Airlines lands at the airport in Zurich July 14, 2012. REUTERS/Arnd Wiegmann

An Airbus A380 jet of Singapore Airlines lands at the airport in Zurich July 14, 2012.

Credit: Reuters/Arnd Wiegmann

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SYDNEY (Reuters) - Singapore Airlines Ltd (SIAL.SI) has lifted its stake in Virgin Australia Holdings Ltd (VAH.AX) to 19.9 percent, boosting its influence at the carrier at a time of industry jostling to secure lucrative routes in Southeast Asia.

The purchase makes Singapore Airlines the joint largest shareholder in Australia's No.2 airline, with Air New Zealand (AIR.NZ) also owning a matching stake that is just under the limit allowed before a full takeover must be launched.

Australia's airline industry has been a battleground for global airlines seeking partnerships in recent months, with Qantas Airways Ltd (QAN.AX) establishing a wide-ranging alliance with Emirates Airlines EMIRA.UL.

Singapore Airlines bought an additional 9.9 percent for A$123 million ($126 million) from Richard Branson's Virgin Group. Branson will retain a 12.4 percent holding.

A spokesman for the company said it had no plans at this point to further increase its holding. The deal is subject to approval from Australia's Foreign Investment Review Board.

"While it is currently unclear whether Branson is looking for a complete sell down, the transaction moves more of the voting power into the hands of the strategic operating partners," Macquarie Equities analysts said in a note.

"At this point there is no talk of a takeover from any of the parties, however, the interest from the partners does confirm the strength of Virgin Australia's virtual international network going forward, as it attempts to compete effectively with Qantas's new reach given the Emirates deal," they added.

Singapore Airlines has been keen to establish a stronghold in Australia to secure passenger feed on to its long-haul services. It has added more double decker Airbus A380s and increased frequencies in the Australian market, hoping to capture passengers disenchanted with Qantas' switch from Singapore to Dubai as its new transit hub.

The move comes a day after Virgin received competition regulatory approval to buy a controlling stake in Tiger Australia from Singapore Airlines' budget associate, Tiger Airways Holdings Ltd (TAHL.SI).

The deal, which must also be approved by the FIRB, marks a return an effective duopoly of Qantas and Virgin by removing Tiger as an independent third player.

Singapore Airlines, which first bought a 10 percent stake in Virgin in late 2012, is paying A$0.48 per share, a 5.5 percent premium to Virgin Australia's last traded price.

The stock was up 2.2 percent in morning trade at A$0.47.

Analysts had believed that Air New Zealand's holding had been diluted through a recent issue of shares by Virgin to SkyWest and Singapore, but the carrier said on Wednesday it maintained its holding through transactions executed simultaneously with the share issue.

(Reporting by Lincoln Feast and Jane Wardell in Sydney. Additional reporting by Anshuman Daga in Singapore.; Editing by Edwina Gibbs)

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