Tigerair shareholders have agreed almost unanimously to plans to discard the money-losing budget carrier's Australian arm and launch a fund-raising drive, as part of a turnaround plan.
About 99 per cent of those who attended a meeting yesterday voted for the proposals after chief executive Lee Lik Hsin explained how these steps would help Tigerair on its recovery path.
Getting rid of Tigerair Australia, which has not made any money since it started operating in 2007, will help the group divert much-needed resources to the Singapore operations, he said.
The plan is to sell Tigerair's 40 per cent stake in the carrier to Virgin Australia for a nominal A$1 (S$1.10).
Tigerair Australia will retain its branding as well as website distribution and sales arrangements. In return, Tigerair Singapore will receive an undisclosed amount in franchise revenues.
The divestment is similar to recent moves to offload stakes in underperforming foreign subsidiaries - Tigerair Mandala in Indonesia and Tigerair Philippines.
On the fund-raising drive, the plan is to raise up to $234 million from existing shareholders through a rights issue. The money will be used to pay off existing debts and fund operations, Mr Lee said.
Depending on the subscription rate, Singapore Airlines (SIA) which owns about 40 per cent of Tigerair, could increase its stake to as high as 71 per cent.
Updating shareholders on other steps that have been taken to trim costs, Mr Lee said that 12 excess planes have been leased to Indian carrier IndiGo.
An order for nine new planes, which were due for delivery this year and next year, has also been cancelled, Mr Lee said, leaving Tigerair with a fleet of 24 aircraft.
The group which reported a loss of $182.4 million in the three months to the end of September, against a $23.8 million profit during the same period last year, plans to work closely with SIA and the group's long-haul budget arm, Scoot.
Connecting traffic between Tigerair and Scoot is less than 5 per cent now, Mr Lee said, adding: "There is much room for increase."
Subject to approval from the Competition Commission of Singapore, Tigerair also hopes to benefit from SIA's extensive connections and distribution network, among other capabilities, he said.
"SIA is a much much larger organisation with much larger scale behind it and so we believe that the potential benefits for us would therefore be greater," he said.
This article was first published on Nov 28, 2014.
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