Cebu Pacific buys Tigerair Philippines for $15M

Published January 8, 2014 11:01am

(Updated 1:33 p.m.) Cebu Air Inc., operator of Cebu Pacific, on Wednesday said it is fully acquiring Tigerair Philippines as part of a strategic alliance forged with Singapore's Tigerair for codeshare and interline arrangements.

Codeshare is a business arrangement in the aviation industry between or among airlines sharing the same flight.

In a disclosure to the Philippine Stock Exchange, Cebu Pacific said the alliance gives both airlines the means to expand networks to more areas in Asia and the Pacific and Western Asia.

“This strategic alliance will allow both Cebu Pacific and Tigerair to leverage on our extensive networks spanning from North Asia, ASEAN, Australia, India, all the way to the Middle East," Cebu Pacific president and CEO Lance Gokongwei said in a statement.

Cebu Pacific and Tigerair joined forces to compete more effectively in the regional market, said Tigerair group CEO Koay Peng Yen.

“We also look forward to achieving greater cost savings from the coordinated operations while providing more travel options and greater convenience for our customers,” he added.

In a separate disclosure also Wednesday, Cebu Pacific said the acquisition of Tigerair Philippines was priced at $15 million – roughly P672 million. The acquisition cost includes 40 percent stake of Tigerair and the remaining equity of Filipino partners in Tigerair Philippines.

"Our customers can expect an even wider range of travel options, and seamless travel connections while enjoying our trademark low fares,” he added.

In August 2012, Tiger Airways Holdings Ltd., through Roar Aviation II Pte. Ltd., bought a 40-percent stake in SEAir Inc. for $2.5 million. At that time SEAir owned two aircraft, which expanded to five with the entry of Tiger Airways.

Regional trend

Cebu Pacific's move to acquire Tigerair Philippines is in line with the regional trend of consolidation in the aviation industry, 2tradeasia.com senior analyst Grace Cerdenia told GMA News Online.

"It's a trend, not only in the Philippines. Logistics-wise, there are routes not fit for larger aircraft or bigger fleet... so bigger airlines are acquiring smaller ones," she said.

In a teleconference with reporters Wednesday, Gokongwei said Tigerair will remain separate from Cebu Pacific.

"We will keep Tigerair brand as an independent operation," he said, adding that the management will be retained after takeover.

Keeping Tigerair Philippines a separate entity from Cebu Pacific will allow both carriers to concentrate on their respective target routes and, at the same time, take advantage of an expanded market base, Cerdenia said.

"It's a brand initiative... may captured market na [ang Tigerair] so they thought of keeping it but it does not mean synergies can't be formed with the brand retention," she said.

However, Cerdenia said Cebu Pacific will face the challenge of keeping "value-for-money fare" with the acquisition, especially with the continuous increase of fuel cost.

Apart from Tigerair Philippines operating under the Tigerair brand, Cebu Pacific and Singapore's Tigerair will brand each other as partners and collaborate on other common destinations in Asia.

Websites of the airlines will also be used as sales and distribution platforms to market all routes operated by both airlines. – Danessa Rivera/VS/RSJ, GMA News

Tags: cebupacific, tigerair, tigerairphilippines