CebuPac acquires TigerAir Phl

MANILA, Philippines - Listed Cebu Air Inc. (Cebu Pacific) has earmarked $15 million for the acquisition of 100 percent of the Philippine unit of Singapore-based Tiger Airways through a strategic alliance that would create the biggest network of flights in the region.

Cebu Pacific president and chief executive officer Lance Gokongwei said in a teleconference that the budget airline is spending $7 million to acquire the 40 percent share of Tiger Airways Singapore Pte Ltd and $8 million for the 60 percent owned by Filipino businessmen in TigerAir Philippines.

“The total consideration for the deal is $15 million of which $7 million went to TigerAir Singapore for their 40 percent and the balance I believe was used by TigerAir Singapore to exercise the acquisition of the 60 percent of their Filipino financial investors,” Gokongwei said.

He said Cebu Pacific – a unit of flagship JG Summit Holdings Inc. – would finance the acquisition through internally generated funds.

“Our balance sheet has sufficient cash to fund this transaction so we can do this out of our current cash balances,” he added.

Gokongwei said the parties involved expect to close the deal next month or in March upon the approval of regulatory bodies including the Singapore Stock Exchange and the Competition Commission of Singapore.

Last Tuesday, TigerAir Singapore and Cebu Pacific entered into a wide-ranging strategic alliance agreement in connection with the proposed sale.

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

Both airlines agreed to jointly operate common routes between Singapore and the Philippines, and other markets; jointly sell and market common and non-common routes using codeshare or interline arrangements; and cooperate in relation to sales and marketing, distribution, airport operations and ground handling, scheduling, pricing, service policies, innovation, procurement and other matters to improve the overall quality of service offered to passengers on their respective operations and to reduce cost.

To enhance the integration of operations, Gokongwei said each carrier would brand itself as partner of the other airline as TigerAir Philippines would initially continue to operate under the TigerAir brand through its Airline Operators Certificate (AOC) on the first year.

 â€œTo reiterate for Cebu Pacific, we intend to keep the Tiger AOC and continue to serve the commitment of the routes and schedules that TigerAir Philippines currently flies. We intend to use all these slots that they are currently serving at this point,” he said.

He explained that both the websites of Cebu Pacific and TigerAir Philippines would be used as sales and distribution platforms to market all routes operated by both airlines and at the same time collaborate on other common destinations in Asia.

Cebu Pacific currently operates an average of 2,200 flights per week with 48 aircraft to 24 International and 33 Philippine cities in its network while TigerAir Philippines operates an average of 102 flights per week with five aircraft to 12 domestic and international destinations from its bases in Manila and Clark.

By combining their resources, Cebu Pacific would be able to provide services to high growth markets including Australia and India while TigerAir would be able to fly more passengers to additional cities in Cebu Pacific’s extensive network in the Philippines and North Asia.

 â€œThere is currently some capacity limitation out of Manila so, what we would focus on is schedule coordination so that we can use the existing slots to offer more better schedule to our consumers so as additional slots become available particularly the night time slots. As more the night capacity or more international flights are more available, then we are in the position to add more flights as we intend to add flights in additional hubs out of Manila including Cebu, Kalibo or the like,” he said.

Cebu Pacific has a fleet of 48 Airbus aircraft including 28 A320, 10 A319, two A330, and eight ATR-72 500. It is in the middle of a $4 billion refleeting program involving the acquisition of 49 brandnew Airbus aircraft consisting of 15A320, 30 Airbus A321neo, and four A330.

On the other hand, the TigerAir Group consisting of TigerAir Singapore, TigerAir Mandala, TigerAir Philippines, and TigerAir Australia operates a fleet of 51 Airbus A320 of which five are being used by its Philippine unit.

For his part, TigerAir Group chief executive officer Koay Peng Yen said both TigerAir and Cebu Pacific share a vision for both airlines to join forces and compete more effectively in the regional market.

 â€œThrough this strategic alliance, we aim to establish a win-win partnership to forge a more competitive TigerAir. 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 said.

He explained that TigerAir could establish a win-win partnership with the proposed sale and strategic cooperation agreement with Cebu Pacific since the Singapore firm has been booking losses since TigerAir’s Roar Aviation II Pte Ltd bought a 40 percent stake in TigerAir Philippines in June 2012.

“By entering into the proposed sale and strategic cooperation arrangement with Cebu Air through the strategic alliance agreement, the company can establish a win-win partnership to forge increased competitiveness and achieve greater cost savings from coordinated operations while providing more travel options and greater convenience for customers, without over-taxing the group’s financial resources,” he said.