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Singapore Airline buy 10% stake in Virgin Australia Singapore Airline buy 10% stake in Virgin Australia
(about 5 hours later)
Singapore Airlines has bought a 10% stake in Virgin Australia, as competition heats up in the Australian aviation market. Singapore Airlines has bought a 10% stake in Virgin Australia as it looks to counter the growing strength of competitors in the region.
Singapore Air will spend A$105m ($108m; £68m) on the deal, Virgin said in a statement. The A$105m ($108m; £68m) deal will also help Virgin Australia challenge Qantas, its main rival in the domestic market.
The tie-up comes after Qantas announced a potential alliance with Dubai's Emirates. Australia and Asia Pacific are one of the few pockets of growth in the airline industry.
Global airlines have increased cooperation as rising fuel prices and competition have hit profits. As a result, airlines from China, Europe and the Middle East have stepped up their coverage of the region.
Qantas challenge Last month, Qantas announced a potential alliance with Dubai's Emirates.
Analysts say Singapore Air, the world's second biggest airline, is backing Virgin to counter the threat posed by Qantas in Asia's lucrative aviation market. "We see today's move by Singapore Airlines as a strategic shift down south to back Qantas' main domestic competitor," said City Index analyst Peter Esho.
"Qantas' ambition to become a premium player in the Asia Pacific aviation market is meeting some stiff resistance, most notably from other key players in the region like Singapore Airlines," said City Index analyst Peter Esho. Diversifying
"We see today's move by Singapore Airlines as a strategic shift down south to back Qantas' main domestic competitor," he added. Virgin, which already has Abu Dhabi's flag carrier Etihad as a minority stake holder, also announced a number of other local deals on Tuesday.
Abu Dhabi's flag carrier, Etihad, also has a minority stake in Virgin Australia. It agreed to acquire 60% of Singapore Airlines' struggling Australian budget carrier, Tiger Airways, for A$25m.
Deal rush
In a flurry of domestic moves, Virgin also announced it had agreed to acquire 60% of Singapore's struggling Australian budget carrier, Tiger Airways, for A$25m.
Virgin and Tiger will jointly spend another A$52.5m to increase Tiger's fleet, if regulators give their approval.Virgin and Tiger will jointly spend another A$52.5m to increase Tiger's fleet, if regulators give their approval.
Virgin also said it would takeover regional airline Skywest, which operates in Australia and South East Asia, for A$99m.Virgin also said it would takeover regional airline Skywest, which operates in Australia and South East Asia, for A$99m.
"The transactions announced today are in line with Virgin Australia's strategy to become the airline of choice in all markets, in order to diversify our earnings and drive growth opportunities for the business," said Virgin Australia Chief Executive Officer John Borghetti."The transactions announced today are in line with Virgin Australia's strategy to become the airline of choice in all markets, in order to diversify our earnings and drive growth opportunities for the business," said Virgin Australia Chief Executive Officer John Borghetti.
Analysts said this would make Virgin a viable competitor to Qantas domestically.
"The transactions overall represent a monumental shift for Virgin Australia which, if approved, will see a more even playing field in Australian aviation," Macquarie analysts said in a note.