Signaling another round of consolidation in the Philippine domestic air transport market, Cebu Pacific and Singapore-based Tigerair have entered into a strategic alliance calling for the Filipino budget carrier to acquire Tigerair Philippines (TAP). The deal promises to strengthen Cebu’s already dominant position in the Philippine domestic market and give it access to valuable slots at Manila’s Ninoy Aquino International Airport (NAIA).
Under the terms of the deal, Cebu Pacific will acquire the 60-percent stake held by SEAir—led by prominent Filipino businessman Tomas Lopez—while Tigerair divests its 40-percent stake. Cebu Pacific has agreed to pay a total of about $15.5 million for the acquisition.
Tigerair group chief executive officer Koay Peng Yen noted Tigerair and Cebu Pacific share aspirations to create the largest airline network between Asia and the Philippines. “This partnership with Cebu Pacific is consistent with our asset-light strategy and builds upon our other alliances,” said Koay.
Each carrier plans to brand itself as a partner of the other airline, while TAP will initially operate under the Tigerair brand upon completion of the divestment. Both Tigerair and Cebu Pacific websites will serve as sales and distribution platforms to market all routes operated by both airlines.
Cebu Pacific operates a fleet of 48 aircraft: two Airbus A330-300s, 28 A320s, 10 A319s and eight ATR72-500 turboprops. It offers 2,200 flights a week throughout its network of 24 international and 33 domestic destinations from hubs at NAIA, Clark International Airport, Cebu Mactan International Airport, Davao International Airport, Illollo International Airport and Kalibo International Airport.
Flying a fleet of three A320s and two A319s leased from Tigerair, TAP offers an average of 118 flights a week covering 11 domestic and international destinations from NAIA and Cebu.
Civil Aeronautics Board (CAB) estimates place Cebu Pacific’s share of the Philippine domestic market for 2013 at about 55 percent, followed by PAL Express and Philippine Airlines, which control some 23 percent and 13 percent, respectively. Apart from increasing Cebu Pacific's share of the domestic market, the deal paves the way for Cebu Pacific to eventually use TAP’s slots in NAIA to expand its international network. More than 1.1 million Filipinos work in Singapore, Malaysia, Taiwan, Korea, Japan and Hong Kong.
Emerson Gonzales, a senior official at the CAB, said that the lack of capacity and slots at NAIA means no new airline could enter the market. Meanwhile, NAIA has no land for expansion. As a result, competition on major domestic routes will involve just three players—PAL Express, Cebu Pacific and Philippine Airlines—compared with five only a year ago.