Qantas (QF, Sydney Kingsford Smith) is to take control of Alliance Airlines (QQ, Brisbane International) pending clearance from competition and shareholders of the charter specialist in an AUD614 million Australian dollar (USD442.2 million) deal slammed as “tone-deaf” by the country’s Transport Workers’ Union (TWU).
The trade union, in a statement, pointed to its timing, 24 hours after the Australian Federal Court found that Qantas had illegally sacked 2,000 ground and baggage workers.
Qantas bought 19.9% of Alliance in February 2019 and at the time flagged its long-term interest in acquiring 100% of the airline. The Australian Competition and Consumer Commission (ACCC) recently dropped a three-year investigation into that acquisition, but said it would continue to monitor the situation.
Under a Scheme Implementation Deed (SID), Qantas will acquire the remaining 80% through a scheme of arrangement where Alliance shareholders will receive Qantas shares worth AUD4.75 for each Alliance share they hold. The deal values Alliance at AUD764.5 million (USD549.2 million), with an enterprise value of AUD919.2 million (USD660 million).
Alliance has been a long-term capacity provider to the Qantas Group. It operates up to eighteen newly-acquired E190 jets for QantasLink, which has enabled the national carrier to open new direct routes and increase frequencies across regional Australia. The airline said that there would be no immediate change to their arrangement as the required approvals were expected to take several months.
The deal will allow Qantas to incorporate Alliance's fleet of 62 aircraft. According to the ch-aviation fleets module, these include sixteen ERJ 190-100ARs, two ERJ 190-100LRs, twenty-five F100s, five F50s, and fourteen F70s. Predominantly providing charters to the mining sector, Alliance accounts for around 2% of the Australian domestic market.
Qantas Group Chief Executive Officer Alan Joyce said acquiring the remaining shares in Alliance would mean QantasLink would better compete in the highly competitive air charter segment, particularly given the shared fleet type of Fokker Aircraft.
“Alliance’s fleet of Fokker aircraft is perfect for efficiently serving resources 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 almost 70 Fokkers. Keeping these aircraft operating reliably for longer than either carrier could achieve by themselves will help keep costs down, which is ultimately good news for charter customers. There are also benefits from bringing together our 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 said.
In a separate statement, Alliance said its directors unanimously recommended that shareholders vote in favour of the proposed scheme.
Alliance Chairman Steve Padgett said: “The transaction represents a compelling opportunity for our shareholders to exit the Alliance business following a period of significant industry upheaval, and to realise a strong return on Alliance’s fleet assets."
Alliance Managing Director Scott McMillan added: “There is strong industrial logic for Alliance to be part of the Qantas Group. The transaction combines the parties’ complementary fleets and operations, allowing for more efficient and sustainable services and crew as well as fleet maintenance synergies, resulting from the ability to cross cover scheduled and non-scheduled maintenance. We expect these operational benefits to translate into valuable customer experience benefits, including less aircraft downtime, fewer disruptions and greater aircraft availability to fulfil ad hoc charter requests.”
