Cebu Pacific will buy the Filipino unit of Singapore-based budget carrier Tigerair in a deal that will create the largest budget airline network between Asia and the Philippines.
Cebu Pacific said that it would pay $15 million to wholly own Tigerair Philippines, a small carrier that is 40 percent controlled by Tigerair, and expects the transaction to close in a few months.
“I think these is much broader collaboration than that, I think the key point there is that we are building a most extensive network between the Philippines and Asia by combining the connectivity and the routes of both Tiger and Cebu Pacific we are now fly combine directly,” said Lance Gokongwei, president and chief executive officer of Cebu Pacific, during a teleconference from Singapore.
He added that,”We are now connecting the 33 cities that Cebu Pacific flies to in the Philippines to the more than 40 or 50 international destinations that a combine the Cebu Pacific and Tiger networks now fly to.”
Gokongwei added that included in the deal is a licensing agreement between Cebu Pacific and Tiger, which allows Cebu Pacific to use the Tiger Philippines brand.
In a statement, Koay Peng Yen, chief executive officer of Tigerair group, said that, “Tigerair and Cebu Pacific share a vision for both airlines to join forces and create the largest budget airline network between Asia and the Philippines. This partnership with Cebu Pacific is consistent with our asset-light strategy, and builds upon our other alliances.”
He added that, “We look forward to achieving greater cost savings from the coordinated operations while providing more travel options and greater convenience for our customers.”
Both parties will collaborate commercially and operationally on international and domestic air routes to and from the Philippines, thereby creating the biggest network of flights to the region.
The strategic alliance will allow both carriers to harness synergies and efficiencies to enhance their network coverage, flight frequencies and customer service, and jointly market their routes using codeshare and interline arrangements.
Subject to regulatory approval, the strategic alliance will jointly operate common routes to and from Singapore and the Philippines.
“We will certainly seek regulatory approvals if so required, but immediate collaboration can begin particularly in the interline and distribution which are quite straightforward,” Gokongwei said.
To enhance the integration of operations, each carrier will brand itself as partner of the other airline, while Tigerair Philippines will initially continue to operate under the Tigerair brand.
Both Tigerair and Cebu Pacific websites will be used as sales and distribution platforms to market all routes operated by both airlines. The carriers also expect to collaborate on other common destinations in Asia.
As part of the strategic alliance, Cebu Pacific will acquire 100 percent ownership of Tigerair Philippines, including the 40 percent stake of Tigerair.
“Prior to the transaction closing, Tiger Philippines is 60 percent owned by Filipino and 40 percent owned by Tiger Singapore. After the transaction is completed, Tiger Philippines will be 100- percent owned by Cebu Pacific which is a Filipino company,” Gokongwei said.
Tigerair Philippines currently operates an average of 118 flights per week with five aircraft to 11 domestic and international destinations, from its bases in Manila and Clark. Cebu Pacific currently operates an average of 2,200 flights per week with 48 aircraft to 24 international and 33 Philippine cities in its network.
By combining their resources, Cebu Pacific will be able to provide services to high growth markets including Australia and India.
Tigerair will be able to fly more passengers to additional cities in Cebu Pacific’s extensive network in the Philippines and North Asia. This arrangement allows both airlines to deploy capital more efficiently.