Regulator delays decision on Virgin deal with Tiger
Virgin notified investors on Friday that it had received a request from the Australian Competition and Consumer Commission for further information.
The airline would not reveal what information it had been asked to provide.
The regulator had earmarked next Thursday for its decision on the deal which, if approved, would return Australia's aviation industry to an effective duopoly.
The ACCC said it had delayed the decision to allow time for Virgin to provide the extra information, and would announce a new date in "due course". However, the call for more details means a decision is unlikely to be made until next month at the earliest.
Virgin chief executive John Borghetti has threatened to walk away from the proposed deal if the regulator forces it to commit to growing Tiger's fleet.
He has said Tiger's fleet could be tripled to 35 planes within five years, but insists that he cannot promise to live up to such growth because of the volatile nature of the industry.
Virgin and Tiger's Singaporean parent have been relying on the "failing firm" argument to win approval from the regulator.
Analysts have expected the deal to gain approval from the Australian regulator.
CBA Equities analyst Matt Crowe has said that Mr Borghetti's recent comments made the Tiger deal "less likely", but he also pointed out that the ACCC's view on whether the budget airline would be able to survive on its own in a competitive market will be a key factor in the regulator's final decision.
Frequently Asked Questions about this Article…
The Australian Competition and Consumer Commission (ACCC) has delayed its decision after requesting further information from Virgin Australia. Virgin informed investors it received the information request but did not disclose the details. The regulator had originally earmarked a decision for next Thursday, but the extra information means a ruling is unlikely until next month at the earliest.
The ACCC delayed the decision to allow time for Virgin to provide the additional information it requested. The regulator said it would announce a new decision date in due course, and the request for more detail pushed any likely decision out beyond the originally scheduled date.
Yes. The article notes that if the deal is approved it would return Australia's aviation industry to an effective duopoly, reducing the number of major competing carriers in the market.
John Borghetti warned he might walk away from the proposed deal if the regulator forces Virgin to commit to growing Tiger's fleet. He said Tiger's fleet could be tripled to about 35 planes within five years, but he insisted he cannot promise to meet such growth targets because the airline industry is volatile.
According to the article, Virgin and Tiger's Singaporean parent have relied on the 'failing firm' argument to seek ACCC approval. The article does not provide a detailed definition, only that both parties are using that argument as part of their case for the deal.
Analysts had generally expected the deal to gain approval. However, CBA Equities analyst Matt Crowe said recent comments by Mr Borghetti made the deal 'less likely' and highlighted that the ACCC's view on whether the budget airline could survive on its own will be a key factor in the final decision.
A central issue for the ACCC, as noted in the article, is whether Tiger Australia would be able to survive on its own in a competitive market. The regulator's assessment of Tiger's independent viability will be important in its final decision.
Investors should expect the ACCC to set a new decision date after it reviews the additional information requested from Virgin. The article says a decision is unlikely until next month at the earliest, so investors should watch for official updates from Virgin and the ACCC about the timing and any material developments.
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