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Virgin leaps on Tiger -

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ELEANOR HALL: It's been a big morning for Australia's aviation industry with a deal announced between Virgin Australia and Singapore Airlines.

Singapore is buying 10 per cent of Virgin while Virgin is buying a 60 per cent stake in the Australian operations of Singapore's budget carrier, Tiger Airways.

The deal is a massive strike against Virgin's chief rival Qantas.

Business editor Peter Ryan joins us now with the details.

Peter, first take us through how this deal was done and its significance to the aviation industry?

PETER RYAN: Well Eleanor, firstly Singapore Airlines, which is the world's number two carrier is spending $100 million to buy 10 per cent of Virgin Australia.

The Singapore relationship is a very big deal for Virgin and the extra money gives it greater confidence to fund growth. At the same time, Virgin is spending $35 million to buy 60 per cent of the Australian operations of Tiger, which is the loss making budget offshoot of Singapore Airlines.

So you may well ask what's in this for Virgin Australia? Well you'll remember Virgin started as a discount carrier after the collapse of Ansett - these days it pretty much caters for corporate clients.

But chief executive of Virgin Australia John Borghetti says today's deal with Tiger puts Virgin back at the low cost end of the business.

JOHN BORGHETTI: This really provides us with a low cost platform to compete in the budget end. Now you'll all remember that when I joined the business, we said we were going to re-position the company and attack the high yielding markets.

In fact, the budget end of the market had been vacated effectively by Virgin Blue for quite some time because our cost basis had increased. So now we need to re-enter that market if we truly want to be the airline of choice in this country in every segment.

ELEANOR HALL: That's Virgin Australia chief executive John Borghetti.

So Peter, does this mean the end of Tiger Airlines?

PETER RYAN: No, John Borghetti is adamant that Tiger will be run as a separate business in Australia with its own chief executive and board. That's similar to the way Qantas runs Jetstar, its low cost carrier.

So Virgin in many ways wants to go back to the future, take on Qantas and Jetstar where it hurts on those lucrative domestic routes.

There was actually a third deal announced today - Virgin wants to buy 100 per cent of the regional carrier Skywest which will give it access to the lucrative routes servicing the resources sector.

Of course these deals announced today have bigger ramifications, in addition to being subject to approval from the ACCC.

And the aviation analyst Neil Hansford says Australia hasn't seen this sort of consolidation in more than a decade before the collapse of Ansett.

NEIL HANSFORD: Importantlyk, Tiger will be run as a separate business, with a separate CEO, a separate board, and it will stay true to the pure, low cost carrier model.

ELEANOR HALL: That's the aviation analyst Neil Hansford.

So Peter, what impact could this have on Qantas?

PETER RYAN: Well Eleanor, the Qantas recently sealed an alliance with Emirates Airlines after a long search, but Virgin is ahead of the game being in a partnership with Singapore Airlines and also Etihad.

And this is all about exploiting lucrative domestic routes to offset the high cost of competing internationally and investors appear to like this deal. Shares in Virgin Australia are up 5.5 per cent today at 48 cents a share.

Qantas shares are also up slightly, around about a tenth of 1 per cent higher, at $1.34 a share.

ELEANOR HALL: Peter Ryan, our business editor, thank you.