Qantas takes stake in Alliance Airlines

February 01, 2019
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Qantas has taken a 19.9 percent shareholding in Brisbane-based charter operator Alliance Aviation and says it will seek approval to ultimately become the majority stakeholder.

Australia’s biggest airline paid $A60 million on market for the stake at an average price of $A2.40 per share.

The announcement provided an immediate boost to Alliance shares which rose 12.6 percent to $A2.59 shortly before noon Sydney time. The shares closed the day up 8.7 percent at $2.50.

Qantas said Alliance was a significant provider to the resources sector, which continues to stimulate travel demand in Western Australia and Queensland in particular.

But rival Virgin Australia lashed out at the move, saying it raised “significant concerns”.

Australia’s No. 2 carrier said it would be looking closely at the potential impact of the deal on domestic competition.

“Our close commercial relationship with Alliance is important to a strong competitive aviation market, including for regional services in Queensland and charter/FIFO services supporting the mining industry,” it said.

“We remain committed to our partnership with Alliance who are a strong and important partner for Virgin Australia.”

Qantas said alliance was a “profitable, well-managed business with high levels of operational maturity’’  that was also a long-term provider to the Qantas Group and flew some of its regional services.

“Our $60 million investment reflects that Alliance Airlines is a well-managed business with a lot of potential,” Qantas chief executive Alan Joyce said in a memo to staff.

“It also reflects our confidence in future demand growth from the resources sector, particularly in WA and Queensland.

“We don’t intend to have any involvement in the management of Alliance as a result of this transaction and aren’t seeking a seat on its Board.

“Similarly, there is no impact on our own operations or our commercial arrangements with Alliance as a result of this announcement.

“Ultimately, we’d like to take a majority stake in Alliance in order to better serve the resources market.

“This would involve a complex regulatory process and approval from the ACCC – so, it is a long-term proposition that we’ll work towards.”

Alliance, which also operates scheduled airline services, said that its board had not received an approach from Qantas prior to the bigger airline’s media announcement.

The company is due to release its half-year results next week. It posted an annual net profit of $18.1m in 2017-18, increased its pre-tax profit by a third, boosted flying hours by 35 percent and saw total revenue rise 23 percent to $A248.

The foray is not the Flying Kangaroo’s first into the resources sector: it bought Perth-based fly in-fly-out operator Network Aviation in 2011.

Joyce has recently been bullish about a recovery in the resources sector, particularly in WA.