The Qantas Airways Limited (ASX: QAN) share price is down more than 2% after the airline canned its acquisition of Alliance Aviation Services Ltd (ASX: AQZ).
In May 2022, the two businesses had agreed that Qantas would fully acquire the Australian charter operator.
Agreement terminated
In April 2023, the ACCC formally opposed Qantas’ acquisition of Alliance.
Both companies believe that the acquisition would have “created customer value without lessening competition in the highly competitive resources sector”, particularly because of efficiencies created by a combined fleet of F100 aircraft.
The ASX travel shares acknowledged that there is “no reasonable path forward” for the deal right now.
Qantas said it would continue to serve the resources sector through its existing charter operations – it currently has around 27% of the total charter market.
Qantas also said that it would retain its shareholding of nearly 20% of Alliance and will continue its long-term agreement that sees Alliance operate up to 30 E190s for Qantas. So, longer-term success for Alliance can still help the Qantas share price.
The ASX airline share also said that it has agreed to exercise its options over four additional aircraft under that agreement, which will bring the total number of E190s operated by Alliance for Qantas to 26, with four options remaining. The additional aircraft are expected to join the Qantas fleet from April 2024.
Qantas management noted that the E190s have helped open new routes across Australia, and the new aircraft will “provide additional capacity and connectivity in the domestic market.”
Management commentary
The 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.
Final thoughts on the Qantas share price
I can see why the companies have given up their attempts to combine, but both may be able to succeed as separate entities as they support each other.
I’m not sure what could happen from here for Qantas. It has a lot of work to do to win back trust of the public after the scandals – profitability depends whether people keep flying with the airline. Remember though, lots of people still use the major banks despite the Royal Commission.
In the short-term, it’ll depend if demand for Qantas flights holds up, including in light of the increasingly difficult economic conditions with high interest rates.
