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Qantas to snap up Alliance in $760m push to corner FIFO market

Qantas has announced a $760 million takeover of Queensland’s Alliance Airlines to get its hands on the lucrative FIFO market.

May 05, 2022, updated May 05, 2022
Pilots from a Qantas subsidiary have walked off the job, (Image: suppled)

Pilots from a Qantas subsidiary have walked off the job, (Image: suppled)

The takeover has won the backing of the Alliance board which said the deal was compelling for shareholders after a period of upheaval.

The takeover will be done through a deed of agreement. Alliance shareholders will receive Qantas shares at a value of $4.75 for one Alliance share, a 32 per cent premium to yesterday’s close of $3.51. Alliance’s shares have been trading at 16 per cent below the level of a year ago.

Qantas will have to issue new shares worth $614 million, but the total value of the deal was $740 million, which includes the 20 per cent stake in Alliance that it bought in 2019.

It said the deal was expected to be earnings accretive.

“For the past 20 years we have developed a robust business model with largely contracted revenue,” chairman Steve Padgett said.

His chief executive Scott McMillan said the deal would mean more efficient and sustainable services.

Qantas already has a lease agreement with the company and Alliance currently operates 18 E190 jets on Qantas’s regional network.

Qantas said a full takeover would allow it to better serve the resources sector.

When it bought the stake in 2019, Qantas said it had an interest in taking out the entire company.

The deal will need competition approval and the ACCC only recently investigated Qantas’s investment in Alliance and gave it the green light. An independent expert’s report will also be done.

Alliance has also been developing a significant expansion in recent times and is currently building a maintenance facility in Rockhampton to support its growth plans.

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Qantas chief executive Alan Joyce said mopping up the shares in Alliance would allow its regional operator QantasLink to better compete in the charter market.

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

“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.”

 

 

 

 

 

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