Tiger deal on hold due to demand
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 as the date for when it would make its decision on the deal which, if approved, would return Australia's aviation industry to an effective duopoly.
The commission said it had delayed the decision to allow time for Virgin to provide the extra information, and that it would announce a new date in "due course".
However, the call for more details from Virgin 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 Mr Borghetti's recent comments made the Tiger deal "less likely" but he also pointed out that the commission'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) delayed its decision because it requested further information from Virgin Australia about the proposed deal. The regulator said it needed time for Virgin to provide the extra details before setting a new decision date.
The commission had earmarked next Thursday as the decision date, but after asking for more information the ACCC said it would announce a new date 'in due course.' The article notes a decision is unlikely to be made until next month at the earliest.
The article only states that Virgin was asked to provide 'further information' and that the airline did not reveal what specific information had been requested by the ACCC.
Yes. Virgin's chief executive John Borghetti has said he would consider walking away from the proposed deal if the regulator forces Virgin to commit to growing Tiger's fleet as a condition of approval.
John Borghetti has said Tiger's fleet could be tripled to 35 planes within five years, but he also insisted Virgin cannot promise to meet such growth because of the volatile nature of the aviation industry.
Virgin and Tiger's Singaporean parent are relying on the 'failing firm' argument to win ACCC approval — essentially arguing that Tiger would not be able to survive on its own in the market without the deal.
Analysts had generally expected the deal to gain approval, but CBA Equities analyst Matt Crowe said John Borghetti's recent comments made the deal 'less likely.' Crowe also noted the ACCC's view on whether Tiger could survive independently will be a key factor in the final decision.
Investors should monitor announcements from the ACCC for a new decision date, any further information requests or disclosures from Virgin Australia, statements from CEO John Borghetti about conditional commitments, and analyst commentary on whether Tiger could survive without the deal.
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