Widely expected consolidation in Singapore’s crowded budget airline sector has become reality, as rivals Jetstar Asia and Valuair have agreed to merge.
The merger announcement came late in July, just weeks after the two airlines said they had withdrawn from tie-up talks as they could not agree a deal. While it was true that the initial talks had collapsed, renewed discussions began soon after.
The loss-making airlines will initially merge under a common holding company known as Orange Star in the first major consolidation deal in Asia’s fledgling low-cost airline sector. Only basic details of the deal were revealed, however, with the two sides saying they had agreed to form “a new Singaporean company that will own and operate both airlines”.
Geoff Dixon, the chief executive of Australia’s Qantas Airways, which owns 49.9% of Jetstar Asia, will be the new airline group’s chairman. Jetstar Asia chief executive Ken Ryan, who is on secondment from Qantas, will be chief executive of both airlines until they are merged. No shareholding breakdown was revealed and Ryan says the two airlines “would operate in their own right for the foreseeable future, with little or no change to the service offered by either airline”.
However, it is widely reported that the two intend to fully combine operations later this year. The enlarged airline is expected to be around 80%-owned by Jetstar Asia’s current shareholders and around 20%-owned by a special purpose vehicle controlled by Valuair shareholders. Jetstar Asia shareholders are expected to inject around S$50 million ($30 million) in new capital while around S$10 million is likely to come from the Valuair shareholders.
Qantas was pushing particularly hard for the merger and it will be the largest single shareholder with a stake estimated at 40-49%, say sources close to the carriers. Apart from Qantas, Jetstar Asia’s shareholders include two Singaporean businessmen and Singapore government investment arm Temasek Holdings.
Valuair’s biggest shareholder is cruise line company Star Cruises, while others include travel portal Asiatravel.com, private investment groups and several Singaporean individuals.
Jetstar Asia and Valuair both started operating last year and each has four leased Airbus A320s in all-economy class configuration. They have both faced difficulties since their respective launches, the main problem being in securing rights to serve additional destinations. Both operate on the Singapore-Bangkok and Singapore-Hong Kong routes and are expected to consolidate these services after their operational merger. Jetstar Asia also serves Manila and Taipei and is adding Kolkata in India, while Valuair also serves Chengdu, Jakarta, Perth and Xiamen. They have yet to say whether all the destinations will continue to be served after the merger is completed.
NICHOLAS IONIDES/SINGAPORE
Source: Airline Business
