Proposed Acquisition by Singapore Airlines Limited of Tiger Airways Holdings Limited

Notifying Parties

Singapore Airlines Limited

Tiger Airways Holdings Limited

Notifying Date

17 October 2014

Summary of Transaction

(i)              the names of the merger parties;

• Singapore Airlines Limited (“SIA”)

• Tiger Airways Holdings Limited (“Tigerair Holdings”)

(ii)              a description of the transaction;

This notification is made by SIA and Tigerair Holdings in relation to:

• the acquisition by SIA of additional shares in Tigerair Holdings (the “Acquisition of Shares”); and

• measures which would be taken by SIA, further to the Acquisition of Shares, which would allow SIA to obtain the ability to exercise decisive influence over the activities of Tigerair Holdings (the “Acquisition of Control”),

(collectively, the “Proposed Transaction”).

(iii)             a description of the business activities of the merger parties worldwide and in Singapore;

The principal activities of SIA (through itself or its subsidiaries) consist of the provision of passenger and cargo air transportation services, aircraft engineering and maintenance services, training of pilots, air charters, tour wholesaling and related services.

The principal activities of Tigerair Holdings (through itself or its subsidiaries) consist of airline and aircraft management. Tigerair Holdings’ wholly-owned subsidiary, Tiger Airways Singapore Pte. Ltd. (“Tigerair Singapore”), is an low-cost carrier (LCC) which operates short-haul flights from Singapore within a four- to six-hour range.

(iv)             a description of the overlapping goods or services, including brand names;

The Parties consider the relevant product market for the purposes of this notification to be the market for the supply of international air passenger transport services on economy-class seats for full-service airlines (“FSA”s) and all classes of seats for low-cost carriers (“LCC”s) on routes:

• operated by both SIA and its subsidiaries, and Tigerair Singapore; and

• involve Singapore as part of the origin and destination (“O&D”) pairs,

(collectively, the “Overlapping Routes”).

(v)              A description of substitute goods or services;

The Parties submit that from a demand-side perspective, all classes of seats of LCCs and economy-class fares of FSAs are close substitutes to the product offerings of Scoot and Tigerair Singapore as well as the economy-class services offered by SIA and SilkAir generally.

From a supply-side perspective, air passenger transport services on the Overlapping Routes can be provided by any carrier, subject to the relevant air traffic rights.

(vi)             the applicant’s views on:

(vii)            definition of the relevant market(s);

The Parties submit that the relevant product markets may be defined to be economy-class passengers for FSAs and all classes of seats for LCCs on the following routes involving Singapore which the SIA Group and Tigerair Holdings overlap in the supply of international air passenger transport services (‘‘Overlapping Routes’’):

The Parties also submit that the relevant geographic market can be defined by O&D city pairs, with a specific focus on the Singapore O&D pairs.

(viii)            the way in which competition functions in this market;

The Parties generally compete with other LCCs which operate a similar LCC business model, offer the same perceived value proposition and have the same target market, as well as FSAs on the Overlapping Routes, in particular FSAs that price their fares on par with LCCs.

(ix)             barriers to entry and countervailing buyer power; and

The Parties submit that there are no prohibitive taxes or other barriers to entry which are imposed on airlines operating in Singapore. With respect to the Overlapping Routes, Singapore has open skies agreements with China, Thailand, Hong Kong and the Republic of China (Taiwan), and carriers from these countries are able to commence services between the said jurisdictions and Singapore.

The Parties submit that there are no switching costs involved when a passenger decides to switch between carriers when booking a new journey or itinerary.

The Parties generally compete with other LCC carriers in the region which operate a similar LCC business model, offer the same perceived value proposition and have the same target market, as well as FSAs in the region, in particular FSAs that price their fares on par with LCCs.

The Parties submit that passenger demand for LCCs is also generally characterised by high price elasticity. LCCs in Asia are also observed to offer near-identical products. With respect to FSAs’ product offerings, although there is a substantial difference in air fares between first- and business-class tickets on FSAs, with tickets on LCCs, the economy-class services provided by an FSA compete with the product offerings of LCCs, including on price. This is notwithstanding that the FSA model places greater emphasis on a mixture of physical and service attributes (e.g. seat comfort, complimentary drinks and food, complimentary seat reservation, complimentary check-in baggage allowances etc), as the air passenger transport services industry is characterised by high price-sensitivity of passengers, where passengers easily switch between a range of available carriers, including both FSAs and LCCs, particularly on the Overlapping Routes, which are short-haul routes.

(x)              the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

The Parties are of the view that the Proposed Transaction will not result in a substantial lessening of competition in view of factors, including, among other things, the following:

Non-coordinated effects

• the intense nature of competition and myriad of competitors that currently exist in the provision of international air passenger transport services, including potential competitors on the Overlapping Routes;
  

• the ability of customers to switch easily between suppliers, and the high price-sensitivity of customers in the air passenger transport services industry; and
  

• absence of significant barriers to entry in the provision of international air passenger transport services generally, and the ease and likelihood of entry of potential competitors into the Overlapping Routes.

Coordinated effects

• there are numerous competitors in the provision of international air passenger transport services, and the ease of switching by, and high price-sensitivity of, customers in the air passenger transport services industry creates strong commercial incentives for carriers to continue pricing competitively, creating instability and reducing sustainability of coordinated behaviour; and
  

• absence of significant barriers to entry in the provision of international air passenger transport services generally, and accordingly high potential for increased competition, which similarly creates disruptive effects and reduces sustainability of any coordinated behaviour.

Decision date:

28 November 2014

Decision:

The Proposed Transaction, if carried into effect, will not infringe the section 54 prohibition.

Click here for the grounds of decision.