Australia's competition watchdog raises concern over Virgin-Tiger deal

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The chairman of Australia's competition regulator has expressed concern that Virgin Australia's proposed acquisition of a major stake in Tiger Airways Australia could reduce domestic competition.

In November 2012, Virgin announced plans to take a 60% stake in Tiger Airways Australia, which would be operated as a joint venture with Tiger Airways Holdings. The transaction is still subject to a number of approvals, including that from the Australian Competition and Consumer Commission (ACCC).

When announcing the proposal, Virgin chief executive John Borghetti said it would provide greater competition in the budget segment of the domestic market, dominated by Qantas's low-cost Jetstar unit.

In an interview on Australian television, ACCC chairman Rod Sims agreed that the joint venture would allow Virgin to better compete with Jetstar, but expressed concern that the deal would remove one of the market's three competitors.

"There's a very complex equation there to weigh up," he says.

On 31 January, the ACCC is due to announce its official position on the joint venture. Its approval is a key condition for the proposed acquisition.

If the deal is approved, Virgin and Tiger plan to invest A$62.5 million ($65.6 million) into Tiger Airways Australia and grow its fleet from 11 Airbus A320s to up to 35 aircraft by 2018. The Tiger branding would also be retained under a 20-year licensing agreement with Tiger Airways.

Virgin said in November 2012 that it plans to complete the acquisition by the end of June.