Australia’s flag carrier Qantas Airways (Qantas) is fully acquiring Alliance Aviation Services, the parent company of charter operator Alliance Airlines (Alliance), so as to better serve the growing resources sector.

Qantas says in a statement it has reached an agreement with Alliance on the acquisition, though it is still subject to a vote from the operator’s shareholders as well as approval from the Australian Competition and Consumer Commission (ACCC).

The carrier says the agreement will see Alliance become a wholly-owned part of the Qantas Group, but there currently is no changes in both parties’ arrangements as approvals would take a minimum of several months to secure.

Alliance has a fleet of 70 aircraft, that each seat up to 110 passengers, which Qantas says makes the Alliance fleet well-suited to charter operations. Qantas says Alliance – which is primarily a charter operator for Australia’s mining sector – controls around two percent of Australia’s total domestic commercial passenger market.

Qantas bought just under 20% of Alliance in February 2019 and flagged its long-term interest in acquiring 100% of Alliance, it adds. But the ACCC then stepped in to investigate the minority holding for three years, though it later made no findings that the move lessened competition.

Smart Aviation Asia Pacific reported last month that the ACCC has since stated that no enforcement actions will be taken in relation to Qantas’ stake in Alliance.

Under this new agreement, Qantas highlights that the remaining 80% would be acquired through a scheme of arrangement where Alliance shareholders receive Qantas shares worth A$4.75 for each Alliance share they hold, representing a 32% premium to Alliance’s volume weighted average price for the past three months.

Qantas would issue new shares valued at approximately A$614 million (US$445 million) in a transaction that is expected to be earning per share (EPS) accretive for Qantas shareholders, before synergies. EPS is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.

Qantas adds that it is Alliance’s biggest single customer, with a long-term arrangement that sees Alliance operate up to 18 newly acquired Embraer E-190 jets for Qantas subsidiary QantasLink, which has helped open up new direct routes and increase frequency  across regional Australia.

Qantas Group CEO Alan Joyce says acquiring the remaining shares in Alliance would mean QantasLink can better compete in the highly competitive charter segment, given the shared fleet type of Fokker aircraft.

“Alliance’s fleet of Fokker aircraft are perfect for efficiently serving resource customers in Western Australia and Queensland. They also have a big inventory of spare parts that would significantly extend the practical life of a combined fleet of around 70 Fokkers,” he adds.

Joyce highlights that keeping these aircraft operating reliably for longer will help keep the costs down, which is ultimately good news for charter customers, adding that there are also benefits from bringing together the operations planning and training facilities.

“The resources sector continues to grow and any new tender for airline services will be very competitive. It makes a lot of sense for us to combine with Alliance to improve the services we can offer, which is a positive for both airlines as well as the travelling public,” he says.

“We have opened up several new passenger routes using up to 18 of Alliance’s E190s, so bringing all 33 of these aircraft plus their crews into the Qantas Group would really expand what we could achieve,” he adds.

Joyce says Qantas also plans to extend its program of guaranteed lower fares for residents in those few communities where Alliance operates its own passenger services, as well as access to its Frequent Flyer program.

Picture Source: (Darren Koch)

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