Cebu Pacific eyes Tigerair Philippines. Should Philippine authorities allow a takeover?

Cebu Pacific's potential acquisition of Tigerair Philippines would cement its leading position in the Philippine domestic market and result in another round of consolidation in a market which has at times suffered from irrational competition. Domestic trunk routes would be left with competition from only three airline groups - Cebu Pacific, Philippine Airlines (PAL) and AirAsia - compared to five one year ago.

Philippine authorities will need to determine if three players are sufficient to maintain competition. With no available slots at Manila, it will be nearly impossible for a new carrier to enter the market.

A Cebu Pacific takeover of Tigerair Philippines could be seen as a defensive move to prevent another airline group from making a move. But with Tigerair Philippines unlikely to have many suitors, the acquisition should be viewed more as a smart strategic move to increase Cebu's slot portfolio at Manila. Divesting of its loss-making Philippine affiliate would also be a smart strategic move for Tigerair as it would allow the LCC group to focus on launching an affiliate in Taiwan and growing in Australia and Indonesia, bigger markets of more strategic importance.