Qantas dumps plan to acquire Alliance Aviation Amid ACCC Rejection.

Australian Major carrier Qantas has abandoned its plans to fully acquire the charter operator Alliance Aviation , after the competition watchdog knocked back the bid earlier this year. 

Qantas and Alliance Aviation Services Ltd (Alliance) have announced the termination of their May 2022 agreement for Qantas to acquire full control of Alliance for $614 million.

The agreement was subject to a vote from Alliance shareholders and competition clearance, that would have seen Alliance become a wholly-owned part of the Qantas Group.

Both companies said they believe the acquisition would have created customer value without lessening competition in the highly competitive resources sector – particularly through the efficiencies created through a combined fleet of F100 aircraft.

• Alliance has a fleet of 70 jet aircraft that seat up to 100 people each, making them well suited to charter operations.
• Between these charter services and a small number of passenger routes that overlap with large mine sites, Alliance accounts for around 2 per cent of the total domestic market.
• Qantas had acquired just under 20 per cent of Alliance in February 2019 and at the time flagged its long-term interest in acquiring 100 per cent of the airline.

However, national carrier Qantas said it will retain a nearly 20% stake in Alliance, and also continue a long-term agreement that sees Alliance operate 30 aircraft for Qantas. That finally ends its May 2022 bid.

In April 2023 , the Australian Competition and Consumer Commission (ACCC) rejected the takeover because it would have combined two of the top three players in the fly-in-fly-out charter market in WA and Queensland.

ACCC Explanation

• “This application involves the second and third largest providers of FIFO services jointly tendering and coordinating services.”
• “The airlines have not demonstrated to us that there’s sufficient public benefit to outweigh the likely detriment from their proposed coordination, so we have decided not to re-authorise the conduct,”

Qantas , Alliance’s biggest single customer,  on Thursday said while both companies continued to believe the acquisition would have created customer value, there is no reasonable path forward for the deal at present. The airline will serve the growing resources sector through its existing charter operations.

The Agreement 

Brief of the  abandoned agreement was , the remaining 80 per cent would be acquired through a scheme of arrangement where Alliance shareholders receive Qantas shares worth $4.75 for each Alliance share they hold, representing a 32 per cent premium to Alliance’s volume weighted average price for the past three months.

Qantas would have issued new shares valued at approximately $614 million in a transaction that is expected to be EPS accretive for Qantas shareholders, before synergies.

Qantas Group Executive of Associated Airlines and Services , John Gissing said:

“Alliance is an important partner for the Qantas Group and the E190s have helped us open new routes across Australia. These four new aircraft will provide additional capacity and connectivity in the domestic market.”

Alliance Managing Director , Scott McMillan said:

“Despite the outcome of the transaction, we look forward to continuing our long-standing and productive relationship with Qantas.”