Singapore Airlines is unlikely to increase its stake in Virgin Australia beyond 10%, with the Star Alliance carrier emphasising that the purchase is strictly a "strategic" move.
The deal, which was announced on 30 October, will see the Star Alliance member purchase 245.57 million newly-issued shares in Virgin Australia Holdings for A$105.3 million ($109 million).
SIA also has anti-dilution rights to maintain a 10% interest in Virgin Australia should there be an equity issuance because of Virgin's announcement that it will buy Australian regional and charter carrier Skywest.
"At this point, we are comfortable with 10%. This is strictly a strategic investment in Virgin Australia," says an SIA spokesman.
"We will not have a seat on the Virgin Australia board and are not involved in the management of the airline."
SIA's purchase comes as Etihad increased its stake in Virgin Australia to 10% in September, while Air New Zealand has a 19.99% stake in the airline.
Buying a stake in Virgin is also a defensive move, allowing SIA to ensure that its interests in the airline are cemented despite the other investors, say sources. This comes after the two carriers signed a wide-ranging partnership agreement last year.
SIA declined to comment on this, although its chief executive Goh Choon Phong points out that the deal "demonstrates the importance and strength of the partnership".
"Singapore Airlines fully supports the ongoing transformation at Virgin Australia, which has already resulted in a more competitive aviation market in Australia. With this investment, there is no doubt that Singapore Airlines and Virgin Australia intend to remain alliance partners for the long haul," he adds.
In 2011, SIA and Virgin signed a long-term partnership encompassing codesharing, reciprocal frequent-flyer programme benefits and lounge access.
They also coordinate schedules to provide connections on some parts of their network, and cooperate on joint sales, marketing and distribution activities.
An expansion of their codeshare partnership is underway and the details are likely to be announced in due course, says SIA.
Source: Air Transport Intelligence news