Australasia emerges as key market for SIA as it increases stake in Virgin Australia

It can help SIA compete fiercely with dominant airlines.

Transforming from a pure low-cost carrier to a more diversified airline, Virgin Australia has become an attractive asset for Singapore’s flag carrier as it operates in the same space as the established full service carrier, Qantas.

According to OCBC, Singapore Airlines (SIA) has shown its commitment by increasing its stake in Virgin Australia from 22.9% to 23.1% through a series of equity swaps, done at a premium to the open market price.

While it’s just a 0.2% increase, OCBC said the key inference is that SIA is showing commitment.

“Apart from Europe, Australasia is another key market of SIA, and a majority stake in VAH may help SIA compete more effectively with the existing dominant player – Qantas. Therefore, we do not rule out the possibility of SIA buying over Air NZ’s stake in VAH, but such action will trigger a takeover bid (based on ASX rules),” OCBC said.

Additionally, OCBC said gaining control of Virgin Australia could lift SIA’s competitiveness in the Australasia market with a larger presence and network synergy with the main group.

“All said, with nothing confirmed, such possibility remains a speculative view but investors may want to monitor for further corporate actions ahead,” OCBC added.