Qantas is trying to tighten its grip on the Australian aviation sector by taking over the big fly-out operator Alliance Aviation for more than $900 million worth of Qantas shares.
The airline said on Thursday it would issue $614 million worth of new shares to fund the all-scrip deal, which will see Alliance shareholders receive $4.75 worth of Qantas shares for each Alliance share they hold.
Alliance said the deal had a 35% premium for shareholders, and valued the company’s equity at $764.5 million and with an enterprise value (including debt) of $919.2 million.
Qantas bought a 19.9% stake in Alliance in 2019, prompting a negative reaction from the Australian Competition and Consumer Commission because it is a direct competitor and also operated flights on behalf of Virgin under a “wet lease” arrangement.
The ACCC investigated that minority holding for three years and made no findings that it lessened competition. But will it still remain hands off, or look again at the deal which does remove a small 92%) of independent capacity, but one which is already almost inside the Qantas web of influence.
Alliance has a fleet of 70 jets and is the biggest provider of fly-in, fly-out (FIFO) charter services to Australia’s mining sector, and also operates services on behalf of Qantas and Virgin. It also flies regulator passenger flights on a handful of regional routes.
Qantas chief executive Alan Joyce said the deal would allow the airline to compete better in the FIFO charter sector.
“Alliance’s fleet of Fokker aircraft are perfect for efficiently serving resources customers in WA and Queensland.
Alliance accounts for around 2% of the total domestic market.
Qantas, though, is Alliance’s biggest single customer, with a long-term agreement that sees Alliance operate up to 18 newly acquired E190 jets for QantasLink.
Qantas shares eased 0.3% to $5.65.
Investors are still focused on this week’s update and orders for bright new big shiny jets that can carry some of them direct to their favourite haunts in London and New York after 2025.
