Virgin Australia buys into Tiger, pits it against Qantas' Jetstar

Virgin Australia has purchased 60 percent of Tiger Airways Australia, setting the low-cost airline against Qantas subsidiary Jetstar.

The deal, priced at $35 million, puts Virgin in the driver's seat of a joint venture that's certain to shake up the Australian domestic flight market.

The airlines say they will invest "up to $62.5 million" to allow Tiger Australia to boost its fleet from the current 11 aircraft to 35 by 2018.

The Tiger brand won't be going away, however – it will remain "for at least another 20 years."

In related news, Virgin Australia today announced it had sold a 10% stake in Virgin Australia to Singapore Airlines and would also buy Perth-based regional operator Skywest.

Business travellers can expect to see a new fare war breaking out for price-sensitive fares, especially for flights from Tiger's hub at Melbourne International Airport.

And, in a press conference this morning, Borghetti pitched three levels of choice for Australian business travellers: Qantas or Virgin, Jetstar or Tiger, QantasLink or Skywest.

The new Tiger = the old Virgin Blue?

Borghetti says that "the budget end of market had effectively been vacated by Virgin Blue for some time because our cost base had increased" even before the shift upmarket to Virgin Australia.

"In effect, Tiger will be run as a separate business with a separate board... it will not be polluted in any form of distraction and will remain true to the from the low-cost carrier concept."

Borghetti stressed that that Virgin and Tiger will not codeshare flights, unlike the current flight sharing between Qantas and Jetstar.

"We have to make distinct separation in marketing, and manage consumer expectations on what they're booking."

However, he wouldn't be drawn to comment on if Velocity points might be earned on Tiger flights, saying that while "Velocity is a very separate program to Tiger, we'll talk about that going forward, but we're not ready to talk about that yet."

Borghetti did have praise for the Tiger-Scoot low-cost carrier partnership, though, so expect that to stay or be developed further.

Tiger, partially owned by Singapore Airlines, hasn't been on most business travellers' priority list, with its delay-prone schedules, super-tight seating and shed-like terminals.

"The joint venture will result in a stronger Tiger Australia, allowing it to leverage the strengths of both its shareholders in network planning, operational management, and procurement, with a low cost and internet-based distribution platform," Tiger Airways Australia said in a statement.

Tiger is a small player by any measurement: its 11 planes pale against over 90 for Virgin Australia, nearly 70 Jetstar planes, almost 150 in Qantas' own fleet, plus 60 flying for Qantas' regional subsidiary QantasLink.

We'll have the very latest on this story as it develops here and on Twitter. Follow us: @AusBT.

John Walton

Aviation journalist and travel columnist John took his first long-haul flight when he was eight weeks old and hasn't looked back since. Well, except when facing rearwards in business class.