Virgin Australia receives FIRB approval for Skywest takeover
18 March 2013
Virgin Australia Holdings' takeover bid for Skywest Airlines has received the green light from Australia's Foreign Investment Review Board, which confirmed it had no objections to the proposed acquisition.
The agreement would see Skywest become part of the Virgin Australia brand, but it would continue operations under its current Air Operator's Certificate and its own management team.
The clearance to the deal would allow Virgin Australia to fast-track its growth in the Australian region and offer a more integrated network, service and frequent flyer programme for its customers, Virgin said in a statement.
The $99-million proposed acquisition, though would need to fulfill certain conditions and regulatory approvals, including the sanction of the Singapore High Court as Skywest, which operates in the West Australian market, is incorporated in Singapore.
The tie up between the two carriers was approved by Skywest shareholders last week.
Virgin's proposed acquisition of 60 per cent of Tiger Airways' shares though still remained under scrutiny from the country's competition watchdog, Australian Competition and Consumer Commission (ACCC), which has delayed its decision.
A decision from the ACCC was expected by 14 March, but Virgin has been asked to provide more information before a ruling could be made.
In a statement of issues, the ACCC noted that the Virgin-Tiger tie up left the domestic aviation sector one carrier short.
It added, the proposed acquisition might increase the likelihood of a coordinated conduct.
''The ACCC's concerns relate to the risk of muted competition following the reduction in the number of airline groups within Australia from three to two (excluding regional airlines), and the loss of Tiger Australia as an independently owned discount competitor,'' ACCC chairman Rod Sims said in the statement.
''This potential reduction in competition arises as a result of the increased ability on the part of Qantas/Jetstar and Virgin Australia/Tiger Australia to coordinate their activities once Tiger Australia is no longer operating as an independent low cost carrier,'' he added.
Skywest shares closed 0.2 cents down at 43.5 cents while Virgin shares closed half a cent down at 40 cents.
Virgin is looking to the takeover to gain a part of the lucrative fly-in, fly-out market in mining-rich Western Australia.
Fly-in fly-out is a method for employment of people who are expected to work in remote areas. Sometimes abbreviated to FIFO when referring to employment status, it is common practice in large mining states in Australia.
Instead of employee relocation with family to a town near the work site, the employee is flown to the work site where they work for a number of days to be flown back to their home town for a number of days of rest.