VIRGIN Australia's proposed takeover of Skywest and Tiger Airways Australia is a tricky issue for the regulators assessing the deal, Australian Competition and Consumer Commission chairman Rod Sims says.
This week, Virgin announced plans to acquire 100 per cent of WA-based carrier Skywest, which operates charter, fly in, fly out and commercial services in the mining-dominated state.
In a separate deal, it also proposed to buy a 60 per cent stake in struggling low-cost carrier Tiger Airways Australia.
Both transactions, which would be funded through Virgin selling a 10 per cent stake to alliance partner Singapore Airlines for $105 million, required approval from the ACCC.
"This is a tricky one. There's no question about that," Mr Sims told ABC Television's Inside Business program on Sunday.
Mr Sims said the deal would, on the one hand, allow Virgin to "bulk up" with the addition of Skywest and Tiger and make it a better competitor with Qantas Airways.
However, on the flip side, the transactions would take out "really the only other competitors in the market and that's the negative".
"We have to weigh that up carefully, and we will, and there's no signals I can send about how we are going to come out," Mr Sims said.
Mr Sims said the ACCC was just at the start of what he described as a complex assessment process.
The ACCC chairman said the regulator likes "more players rather than less", but had to balance the fact that it could be argued Virgin's deals would "bring more impetus for competition".
"The question is what does this mean longer term in terms of having a competitive market where new players can come in and that, as I say, is always important, so we'll have to weigh all that up," Mr Sims said.
CBA Institutional Equities analysts Matt Crowe and Andre Fromyhr said they believed Tiger Australia's majority ownership by Virgin Australia would be positive for the aviation market.
"We continue to believe that Virgin Australia will be a formidable competitor in all markets that it services," the pair said in a research note dated October 31.
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