Virgin Australia offers $102 million for Skywest

Associated Press

SYDNEY (AP) — Virgin Australia Holdings, the nation's second-largest airline, announced Tuesday a 99 million Australian dollar ($102 million) takeover offer for regional carrier Skywest Airlines and revealed it had bought a 60 percent stake in budget domestic rival Tiger Airways Australia for AU$35 million.

The Brisbane-based airline also announced that it had sold a 10 percent stake to Singapore Airlines, its alliance partner which owns Tiger, for AU$105 million.

The deals are part of Virgin's expansion plans aimed at challenging the dominance of Qantas Airways as No. 1 Australian carrier.

Virgin said its cash and scrip offer for Skywest, which operates in regional Australia and Southeast Asia, was worth AU46.88 cents per Skywest share.

Skywest executive chairman Jeff Chatfield said in a statement the offer, which is subject to regulatory and shareholder approvals, represented a substantial premium to the airline's share price.

Virgin chief executive John Borghetti said he was pleased by Singapore Airlines' support as an investor.

"We believe this investment demonstrates their confidence in our strategy and it enables Virgin Australia to fast track its growth plans," Borghetti said.

Virgin and Tiger plan to spend up to AU$62.5 million on expanding the budget carrier's fleet from 11 aircraft to 35 by 2018.

Virgin shares climbed more than 5 percent to AU48.5 cents in early trading Tuesday on the news. Qantas was down flat at AU$1.34.