Singapore’s Tiger Airways is going all out in getting a bigger slice of the budget flight service pie in Southeast Asia, after it finalized a deal to buy 40% stake in Philippines-based Southeast Asian Airlines (SEAir), Inc for US$7 million.
According to Malaysian daily theSun, the acquisition will enable Tiger to tap into international and domestic destinations within a five-hour flying radius from the Philippines, including to cities such as Singapore, Hong Kong, Bangkok and Kota Kinabalu in East Malaysia.
“It is one that will enable us to leverage on the strength of our Singapore base and scale up the size of our business across the region,” Tiger’s chief executive officer Chin Yau Seng was quoted as saying.
Tiger’s acquisition in SEAir is its second within six months, after it snapped up a 33% stake in ailing Indonesian liner Mandala Airlines in January this year. “Asia is one of the fastest-growing areas in air travel and we intend to play a major role in driving that growth.
“The Philippines is a large country with more than 7,000 islands and a population of over 90 million, excluding the 11 million working and living abroad. There is enormous potential to develop the domestic and international air travel,” Chin said.
Earlier, the deal between Tiger and SEAir was cast in doubt after the deal was stuck in the due diligence phase since February 2011. SEAir, a smallish carrier, operates two Tiger A319s on regional international routes from Manila’s alternative airport, Clark.
With the acquisition of the carrier, Tiger is putting itself into head-on competition with Malaysia’s AirAsia, which also has a Philippines-based unit. Nevertheless, Tiger’s expansion plan is expected to give AirAsia a run for the money, especially after it acquired Mandala and resumed the highly competitive Jakarta-Kuala Lumpur route as well as beef up its Jakarta-Singapore route.
According to the Centre for Aviation website, AirAsia accounts for 35% of total capacity on the Jakarta-KL route. AirAsia‘s Indonesian unit may be among the smallest low cost carriers in the Indonesian aviation market, but it is the largest in the country’s international market.
The website further noted that international traffic in Indonesia grew 13% last yeat to 10.8 million passengers and was up by another 15% in January 2012.
“As Indonesia’s economy improves and its middle class grows, a larger portion of Indonesia’s 240 million people will have means to travel abroad. More short and quick trips within Southeast Asia, with low fares by airlines like AirAsia and Mandala/Tiger stimulating demand, could easily lead to Indonesia’s international market quickly doubling or tripling within the next few years,” the website said.