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Cebu Pacific seals deal with Tiger Air

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Cebu Pacific seals deal with Tiger Air

/ 05:15 AM January 09, 2014

A Cebu Pacific plane on the tarmac of the Puerto Princesa international airport. RICK ALBERTO/INQUIRER.net

Cebu Air Inc., operator of the country’s biggest budget airline Cebu Pacific, has sealed a strategic alliance with Singaporean low-cost carrier Tiger Airways Holdings, a filing at the Philippine Stock Exchange showed.

The agreement, disclosed by both airlines to bourses in the Philippines and Singapore, was described as a “wide-ranging” partnership that also includes Cebu Pacific’s acquisition of 100 percent of Tiger Airways’ domestic unit, Tigerair Philippines, for $15 million.

The acquisition and partnership are still subject to the approval of regulators and lawmakers.

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The deal’s implications are already drawing scrutiny from the Civil Aeronautics Board, its executive director Carmelo Arcilla said, as Cebu Pacific and Tiger Airways announced a plan to jointly operate common routes to and from Singapore and the Philippines via codeshare and interline agreements.

The House committee on transportation was also wary against the possibility of higher domestic air fares given reduced competition, Rep. Terry Ridon, a member of the committee, said on Wednesday.

The move was nevertheless viewed as positive for the country’s aviation sector, where yields have suffered due to its “fragmented” structure, said Jose Mari Lacson, head of research at stock brokerage firm Campos Lanuza & Co.

With the acquisition of Tigerair Philippines, the remaining groups would be flag carrier Philippine Airlines, its sister firm PAL Express, and the local units of Malaysian low-cost giant AirAsia Bhd.

“It’s a first step toward a more rational industry structure,” Lacson said in an interview. “This helps alleviate pressure on yields so it’s a good thing for the entire industry, it gives them more pricing power.”

Cebu Pacific gained 3.55 percent to P51 a share while main rival PAL Holdings, which operates Philippine Airlines, closed flat at P6.20 a share.

Cebu Pacific CEO Lance Gokongwei said in a media teleconference Wednesday that they plan to initially continue to operate Tigerair Philippines under the Tigerair brand.

“Our intention is to grow Tigerair [Philippines] as an independent franchise, which is viable and sustainable,” Gokongwei said, citing Cebu Pacific’s commitment to infuse capital into the carrier, which has so far struggled financially.

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Tigerair Philippines, which is 40 percent held by Tiger Airways and the remainder by other financial investors, operates a fleet of five mid-range Airbus A320s and A319s.

Its acquisition would increase the domestic market share of Cebu Pacific, which operates 48 planes, to almost 56 percent from 50.8 percent in the nine-month period last year, data from the CAB showed.

This is apart from giving Cebu Pacific access to Tigerair Philippines’ valuable slots at the congested Ninoy Aquino International Airport in Manila, the country’s busiest air gateway.

Gokongwei said they anticipated synergies with the acquisition of Tigerair Philippines. Moreover, both websites of Cebu Pacific and Tigerair Philippines “will be used as sales and distribution platforms to market all routes operated by both airlines,” the stock exchange filing showed.

Originally posted: 11:52 am | Wednesday, January 8th, 2014

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TAGS: acquisition, aviation, Business, Cebu Pacific, tigerair
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