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Qantas moves to acquire Alliance Aviation

written by Hannah Dowling | May 5, 2022

Mock-up of an Embraer E190 in QantasLink livery by Lila Design.

Qantas has announced it intends to purchase Alliance Aviation, three years after acquiring a 19.9 per cent stake in the carrier.

The airline said on Thursday that the move, which would see Alliance become a wholly owned subsidiary of Qantas, would allow it to “better serve the growing resources sector”.

It comes just one month after the ACCC finally cleared Qantas’ stake in the airline, after a three-year investigation into its impact on competition.

Alliance currently holds wet lease agreements with both Qantas and Virgin, for the use of its fleet for regional, charter, and fly-in fly-out operations.

It also comes after Qantas exercised more options under its wet-lease with Alliance in March, for the use of 14 QantasLink-branded Embraer E190s, crewed by Alliance personnel. The agreement offers Qantas options to use up to 18 Alliance E190s under the QantasLink brand.

Qantas said its existing agreement with Alliance will continue to operate as normal until any deal is finalised.

Qantas said the remaining 80 per cent share of Alliance would be acquired through a scheme of arrangement, where Alliance shareholders receive Qantas shares worth $4.75 for each share held in Alliance.

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This represents a 32 per cent premium to Alliance’s volume weighted average price over the last three months, according to the airline.

Alliance’s directors have unanimously recommended the scheme, with chairman Steve Padgett stating the transaction “represents a compelling opportunity for our shareholder to exit the Alliance business following a period of significant industry upheaval, and to realise a strong return on Alliance’s fleet assets”.

Qantas has informed the ACCC of its intentions, and the final deal will require formal approval from the competition watchdog. The deal is also subject to approval by Alliance shareholders.

Qantas purchased a 19.9 per cent stake in Alliance in 2019 and has long flagged its desire to acquire 100 per cent of the carrier.

Qantas Group CEO Alan Joyce said acquiring Alliance under the QantasLink brand allows the airline to be more competitive in the fierce regional aviation market.

“Alliance’s fleet of Fokker aircraft are perfect for efficiently serving resources customers in WA and Queensland,” Joyce said.

“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 themselves will help keep costs down, which is ultimately good news for charter customers,” he said.

“The resources sector continues to grow and any new tender for airline services will be very competitive. It makes 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.”

Comments (31)

  • Arne

    says:

    There will be the typical naysaying from the competition but this is surely just a positive, hopefully Alliance will maintain it’s own identity (and awesome liveries) though

    • Lance

      says:

      The CEO been complaining of the Lockdown costing money, losing revenue over the last 2 years all of a sudden out of the blue Qantas has money to buy out this Airline acquiring a 19.9 per cent of this carrier to buy out the 80.1 %.
      And then this new Airline coming in the market and he going to chop this airline before they start at the knees.
      The CEO doesn’t want competition he made that very clear and the Australian public will pay in the end.

      • Rocket

        says:

        Actually, I doubt any money is changing hands at all. The Board will simply do a rights issue for a number of shares equal to those held by the remaining shareholders in Alliance (the 80.1%) and Qantas shares will be issued to replace them in the name(s) of the Alliance shareholders. They will have voted on an agreement for their shares to be acquired in that manner.
        Yes, it might dilute the overall value of QAN stock on issue but only by fractions of a cent so no real money is changing hands. It’s not like Qantas is going to Virgin and paying them cash for, say, VARA. Because there is an existing shareholder base, their Alliance shares will basically just become Qantas shares.

      • Craigy

        says:

        Can’t you read. Qantas already owns 19.9% of Alliance. In the purchase of the remaining 80.1%, Alliance shareholders will receive 1 QF share for each Alliance share. So the purchase is being funded by the issuing of Qantas shares. I assume you are referring to Bonza. How is Qantas going to chop it off at the knees?

    • James

      says:

      Their Livery is somewhat dated in my opinion, however they make money and survive so it must work 🙂

  • chris

    says:

    The last thing the industry (or the country as a whole) needs is more centralisation of power and market share in the hands of the big gorilla in the room!

    • Vannus

      says:

      If QANTAS didn’t exist, this Country would be in deep do-do, in many ways.

      As our National Carrier, it is also incumbent upon it to provide assistance to our ADF whenever needed, & which it has done so frequently.

      What QANTAS has done with this deal is excellent business, & can only help the communities’ being well served into the future.

      Those who say otherwise, don’t know how business works, & certainly don’t have a clue how an Airline as huge as QANTAS works, in its’ everyday job.

  • Louis Magee

    says:

    This is a BAD BAD development and I hope Alliance’s shareholders and the ACC give it the thumbs down. Alliance is an outstanding example of a small independent airline that has grown up in two decades with a great ability to stand on its own feet, with a visionary leader, excellent management, a rounded growing fleet and clearly a dedicated work-force. In the Australian context, that is no mean achievement. Be in no doubt that if QANTAS is successful, Alliance will be wholly absorbed and will lose its identity, name and special characteristics within months, if not weeks. VIRGIN will also be excluded from its wet-lease arrangement with a QANTASised Alliance, thereby increasing the super-power position of QANTAS in the Australian aviation market. QANTAS needs serious competition to keep it honest. Its acquisition of Alliance will reduce the competitive environment even further. BAD result.

    • Rocket

      says:

      I’m sorry but you comment lacks rigour.
      Alliance is a very successful SMALL niche operator. There is no guarantee it can survive in the long term.
      Virgin bought SkyWest, then parked half it’s aircraft. They sat alongside the Embraers that VA had paid WAY over market rate for leases on, so basically, management had removed two aircraft that were capable of keeping the VA fleet flexible.
      They then realised they didn’t have the aircraft to operate promised (and sold) services – you’d think anyone with a modicum of business sense would have checked that first but, alas, no, that’s not how they do things at VA – shoot from the hip is their policy.
      They then started paying Alliance to do the flying for them – I mean, park the aeroplanes, get rid of the crew via redundancy, then pay through the nose to a charter operator to do the flying.
      It’s not like I’m singling them out for this either, it’s part of a pattern. Remember how they also decided they’d put 737s into TT?? They basically employed a heap of 737 drivers before the aeroplane was on the AOC and worse, got rid of most of the 320 drivers – then realised getting the 737 on the AOC wasn’t as easy as they’d expected so they were stuck with a bunch of pilots that couldn’t fly the aeroplanes they had and the aeroplanes they didn’t have on the AOC they had plenty of pilots for – they had to go cap in hand to Alliance again to do some of that flying or have VA do it at much higher costs.
      Of course, when the services to Bali/DPS started, they were warned by the Indonesian Government that the bi-lateral excluded contracting out to another operator which TT legally was – so they got kicked off the route and banned.
      I mean, you COULD NOT make this stuff up for a program in the vein of The Office, it would be considered too far fetched.
      Bottom line, is Alliance may struggle in the new environment and it is much better it survive as a subsidiary of QF where at least it will be administered competently and not be pulled apart and the valuable parts thrown away.
      As for Virgin being ‘kicked off’ their wet lease – it was only gross, overwhelming corporate incompetence prior to the collapse that led to them needing that arrangement anyway.
      Virgin mainline, in its new form post administration is a much fitter competitor for Qantas in one of Qantas’ main markets, ditto Rex and Bonza will also put pressure on airfares downward – the multitude of international airline competitors will keep Qantas on its toes internationally.
      Aside from that, because of the nature of the world industry, we need a large airline based here that is out of scale to others, do you really think that the American carriers or the ME carriers would care to damns about picking apart and destroying the industry here if we didn’t have a ‘gorilla’ to fight back??

  • Jack

    says:

    How times have changed. On the brink of collapse, had to sack and outsource thousands of jobs.
    Then buys 40 brand news aircraft and buys a competitor. All in a year.

    • Craigy

      says:

      Your understanding of what has happened over the past two years is sadly lacking in knowledge and is clear in your comments.

      • Vannus

        says:

        Touché, Craigy!

        The ignorance demonstrated by numerous commenters’ on this article, is beyond the pale.

        You’re 100% correct, in the fact that many don’t know of which they speak, as evidenced by their lack of knowledge comments’.

    • Jack

      says:

      They didn’t buy 40 aircraft, they bought 220 bro

      • Warwick

        says:

        Check your maths!

        Total is: 146

        Ordered are: 12 A350-1000’s.

        67 A321XLR’s.

        67 A220’s.

        Delivery dates range from 2023, through to 2034, inclusive.

        There’s an included option for 94 of the latter two types’, in this total of 146.

  • Turbononious

    says:

    VA uses alliance to service many (all?) of their scheduled flights between NTL and BNE. Wonder how many more of VA’s routes have changed from VA metal to charters, and how much that fact contributes the Qantas acquisition

  • Ashley

    says:

    This can only be good……for both airlines’.
    ‘Tis a pity others’ think it’s a ‘bad thing’. Not much future thought’s gone into saying that.

    We live in a completely different world now, thanks to the wu-flu, & business must do whatever possible to move forward, to make the most in this uncertain life situation, we all face.

    Let’s hope the ACCC won’t take three years’ to make a decision, like they did for QANTAS just recently.

  • Jack

    says:

    All I can say is f**k off Qantas. I’m so mad!! They are so threatened by Alliance and it’s business they have to be Monopoly AGAIN and shut down an perfectly good, independent airline! SOME PLEASE HELP AND STOP THIS!!! If we loose Alliance I will hold Qantas accountable and I will NOT be happy.

    • Nerdy Nev

      says:

      Your comment is ludicrous.
      Making ‘QANTAS accountable’… for what?
      It’s called ‘business’, & the Airline can do what it has to do to survive.

      BTW, it’s ‘lose’, not ‘loose’, which means ‘let go’.

      All you naysayers’ should actually listen to its’ CEO, Alan Joyce, when he talks about his Company.
      You may learn a few truths’ about how a huge airline is run.

      • Jack

        says:

        First off, i think you dont even know how to speak Eglish. If you read my comment properly, you would realise that everything i said makes sense. Stop being a dick who is a goody two shoes and wake up to reality.

        • Nerdy Nev

          says:

          At least I know how to spell the word ‘English’.

          Also the personal pronoun ‘I’ is always in a capital letter.

          ‘Don’t’ is a contraction, so it has an apostrophe.

          Maybe you should read all the other comments’ on this article.

          It still makes your comment ludicrous, & in the minority.

  • Jared

    says:

    No way. Qantas is getting to powerful
    Prices are going up and up

  • Mac Carter

    says:

    Hopefully Air North will still be standing when the dust settles.

    The Fokkers are ideal for the mine fly in fly out work, with increased combined spares inventory of Alliance and Qantas Link hopefully they can continue flying for many more years

  • Jimmy

    says:

    Now watch Bain buy Cobham to maintain an E190 offering for VA and bolster VARA FIFO offering as they look to compete with the QF gorilla on regional Jets and turboprops.

    • Alistair

      says:

      Bain’s spending as least possible on VA, so why would they buy a little local airline company like Cobham?

  • A very sad and sorry situation that has been allowed to happen. I agree that QF will become, if not already, too powerful and having swallowed up Network here in Perth, and now Alliance, very anti competition, clear and simple.
    Similar to the UK where British Airways ( both as BEA and BOAC) pushed out the competition in British Eagle, BCAL, BMA and blocking VIRGIN ATLANTIC at every move, that should not be allowed to happen here.
    As one of the previous correspondents has stated, strange that a business like QF, on the edge of bankruptcy allegedly, can buy or lease a whole new fleet AND Alliance at the same time.
    Shame on the ACCC for letting this happen.

    • Vannus

      says:

      Companies’ buy out other companies’ constantly.

      What’s your dislike of QANTAS doing the same?
      It’s not anti-competition, it’s the way business has been done for decades’.

      Read the above article again, about the share situation, to understand what’s happening.

      Also listen to its’ CEO, Mr Alan Joyce in the interview with Ross Greenwood, in Feb 2022, to understand the ways in which the Company raised revenue in March 2020, & what the Business Plan was it put into effect then.
      This plan is flexible, & has seen the Company’s debt reduce from $5.5bn Dec 2021, to $4.5bn as at 30-04-2022, with the balance to be paid by 31-12-2022.

      You really need to do ‘homework’ on how our National Carrier works. It’s extremely interesting.

      The Airbus orders’ QANTAS has made will be paid for between now, & 2034.
      The Company has ALWAYS purchased their fleet.

  • Alex in Mt Lawley Perth

    says:

    Gawd!! Does this mean the F100s will keep operating from Perth airport and from before 5am each weekday for the foreseeable future ? Proportionally louder than a 707 and the noise radius impacts half a million people.
    At least virgin is phasing the Fockers out. (Did I spell that right)
    Any comments on how Perth Airport’s ESG KPIs will look to investors with such noise dirty aircraft whacking up the dBs at 5 in the morning

    • Leo

      says:

      Ah, no, it’s ‘Fokkers’………

  • Rod Pickin

    says:

    This acquisition was always on the cards and it will be a great result for both QAN and AQZ AND our country! The problem now is that QF has no other project/direction, it is left stranded for up to 6 years with no real published plan for what aircraft is will use from now and until the completion of the A350-1000 delivery programme in order to meet the current and forecast public demands for air travel and schedules. How long and how many aircraft are going to be left sleeping in the sand and crews wasted? – there is ample evidence to show QF needs to get weaving and reintroducing crew/aircraft re-familiarisation/training now; (see BA probs in the UK). Despite the fact that when here, the A350-1000 can operate direct ex the East Coast to LHR and JFK, – will it? In the case of SYD and MEL traffic ok, maybe on alternate days from each port or the dreaded 1 stop ex MEL top up in SYD daily to JFK. in order to make it profitable. In the case of the UK traffic, commercially it is a doubtful operation ex BNE direct, a great potential via PER though, but daily?? Back down south at MEL and SYD will the A380 still be available on the Kangaroo route even via BNE, surely it has to be! maybe on alternate days ex each port as with the A350. Sure, in the future stuff but we need a functional operational plan like now, we can’t have A/C parked and others in their place optg severely weight restricted most likely unprofitable sectors as it just does not compute nor is it commercially acceptable.

  • Manny

    says:

    The Alliance treatment of clients over the past 12 months has been atrocious.
    Perhaps these two deserve each other, the arrogance by both is well matched.

  • Donald

    says:

    Well done Qantas, this would be the best move for you as a company.

    Qantas you have done an awesome job in the past & into the future, keep up you good work.

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