Tigerair (Singapore Changi) has stepped up plans to raise much needed capital after it posted its biggest ever net loss of SGD182.4million (USD145.6million) for its fiscal second quarter ended September.
Tigerair announced last week that Singapore Airlines (SQ, Singapore Changi) will increase its stake in the budget carrier by 15% from the current 40%, to 55% by converting some Perpetual Convertible Capital Securities (PCCS) into shares and then buy as much as SGD140million (USD110million) of additional stock in a rights offering, aimed at raising up to SGD234million overall. Singapore Airlines' stake could rise to as much as 71% once the offer ends in late January of next year.
"Tigerair’s largest shareholder, Singapore Airlines Ltd (SIA), has undertaken to subscribe for its pro-rata entitlement, and also subscribe for excess Rights Shares, up to a total of SGD140 million. Prior to the Rights Issue, SIA will convert its perpetual convertible capital securities (PCCS) holdings into Shares. The conversion will raise SIA’s stake in Tigerair from 40% to approximately 55% before the Rights Issue, effectively making Tigerair a subsidiary of SIA," a statement to the Singapore Stock Exchange read.
Tigerair is expected to fit neatly into Singapore Airlines' portfolio with analysts expecting it to be repositioned a feeder carrier for longhaul budget subsidiary, Scoot (TR, Singapore Changi).
Meanwhile, in a further rationalization of its loss-making subsidiaries, Tigerair has agreed to sell its remaining 40% stake in Tigerair Australia (Melbourne Tullamarine) to Virgin Australia (VA, Brisbane International) for the princely sum of AUD1 (USD0.88). The deal will effectively end the partnership between the two airlines, which began in July 2013.
"As part of the proposed acquisition, Virgin Australia will secure the brand rights to fly Tigerair Australia to a number of short-haul international destinations, providing new growth opportunities for the business," Virgin Australia said.
The decision to divest from its Australian business follows that taken in July to terminate its Indonesian operation, Tigerair Mandala (Jakarta Soekarno-Hatta), with heavy losses and a tough local market cited as mitigating factors. It also disposed of its shareholding in Tigerair Philippines (Angeles City Clark International) to Cebu Pacific Air (5J, Manila Ninoy Aquino International) in February this year.