Virgin only a start for Singapore's airline purchases

By YOKE HAR LEE

Singapore Airlines plans to buy more airlines after its 49 per cent purchase of Virgin.

The chief executive officer, Dr Cheong Choong Kong, describes the Virgin move as a "crowning glory" which helped to neutralise the sour taste left by the false start with Ansett Australia.

Dr Cheong believes the failure of the Ansett deal may be a blessing in disguise.

"The Virgin stake is our first in an airline," he wrote in the latest staff news letter. "It won't be the last, and it should not be long before we are recognised as a major global group of airlines and airline-related companies."

Singapore will spend some $1.86 billion on the Virgin acquisition, including a capital injection of $153 million.

Under the deal, Singapore will take equity in Virgin Atlantic, the holding company for Virgin Airways, Virgin Holidays, Virgin Sun and Virgin's cargo operation, Virgin Aviation Services.

Dr Cheong said Singapore had been watching Virgin since its birth.

"We watched with increasing admiration its growth, its success and its triumphs over obstacles and a certain airline. There could not be a better match than the two airlines."

The deal between Singapore and Virgin had its beginnings in a hand-written note from Virgin's chairman, Sir Richard Branson, with just two sentences: one indicating a deal was possible and the second - who is paying for lunch.

Dr Cheong said the scrappy note would be framed and displayed prominently in his office.

The year just ended has seen some major issues resolved at Singapore. One was the removal of the limit on foreign ownership of the airline through the merging of the two classes of shares in the companies - one for foreigners and one for Singaporeans.

Aviation analysts say that even after the Virgin acquisition Singapore will be cash-rich, putting it in a position to buy other airlines.

Among the Asian airlines up for sale include Air Philippines, Philippines Airlines, Shanghai Airlines, Air India, China Airlines, Garuda Indonesia and Thai Airways.

While Singapore has publicly said it is not in discussion with Ansett any more, analysts have not ruled out a possible deal with Brierley Investments.

Brierley owns 47 per cent of Air New Zealand, which in turn has a 50 per cent share in Ansett Australia.

Air New Zealand's shares fell further yesterday. The A shares fell 2c to 221c, down from a high of 270c in November before Virgin announced its Australian intentions.

The B shares fell 5c yesterday to 245c, a 22 per cent decline from November's 315c.