By Anshuman Daga and Byron Kaye
SINGAPORE/SYDNEY (Reuters) - Cash-rich Singapore Airlines Ltd (SIA) is injecting up to $110 million (68.40 million pounds) to take control of loss-making affiliate Tiger Airways Ltd, shoring up the budget carrier while scrapping its regional ambitions as competition rages.
Announcing a record quarterly loss that sent its shares tumbling as much as 10 percent, Tiger said on Friday that SIA will raise its stake to about 55 percent from 40 percent by converting existing securities into shares.
Tiger then plans an up to S$234 million (114.33 million pounds) rights issue, with SIA buying up to S$140 million of new shares and possibly raising its stake to as much as 71 percent.
The low-cost airline also agreed to sell its remaining 40 percent stake in its Australian unit to Virgin Australia Holdings for just A$1. Months after it shut down its Indonesian venture and sold its Philippine business, the sale clips Tiger's wings back to those of a Singapore-focused carrier but leaves questions on how it will secure growth.
"We need to now stem the losses arising from this joint venture and divert our resources back towards our Singapore-based airline in the execution of the turnaround plan," Lee Lik Hsin, Tiger's chief executive told reporters in a conference call.
Lik Hsin, a 20-year veteran of SIA and a board member of Tiger, became the CEO of Tiger in May, in a sign that its largest shareholder would wield greater influence.
Analysts said the shrinking of Tiger's operations meant that it had to carve out a new growth strategy. Low-cost regional rivals AirAsia Bhd and Lion Air have ordered hundreds of planes and expanded aggressively over the past few years.
"They need to address a strategy going forward because they have divested Australia, they are out of Indonesia, out of Philippines, so what next now," said Derrick Heng, analyst at Maybank-KimEng, referring to Tiger.
"Are they going to stay as a standalone unit just in Singapore? That will put them at a disadvantage to other players like AirAsia, which is growing across the whole region."
Tiger plunged into a net loss of S$182.4 million for the three months ending September, largely due to a charge for the sub-lease of surplus aircraft, from a profit of S$23.8 million a year ago.
Tiger's shares fell as much as 10 percent to a record low of S$0.290 before recovering to S$0.31, down 5 percent on the day and nearly 40 percent so far this year.
In Australia, loss-making budget airline Virgin Australia signalled it plans to cut a bloated Tiger Australia fleet that has hobbled its own turnaround efforts. Virgin bought its original 60 percent stake from Tiger for A$35 million (19.05 million pounds) just 14 months ago.
Australia's domestic aviation market has been under intense pressure as local carriers, including Qantas Airways Ltd, engaged in a bitter price war just as demand fell amid a faltering economy.
(Additional reporting by Aradhana Arvavindan and Rachel Armstrong in SINGAPORE; Editing by Kenneth Maxwell)