Qantas shelves Alliance takeover plan after opposition from the ACCC

The embattled airline has shelved its $614m takeover of charter operator Alliance Aviation, rather than pursue costly legal action.

Qantas has decided to shelve plans to take over charter operator Alliance Aviation rather than pursue costly legal action to try to finalise the $614m deal.

The decision, under new chief executive Vanessa Hudson, comes after the Australian Competition & Consumer Commission opposed the planned transaction on the basis it would reduce competition in the fly-in, fly-out markets of Western Australia and Queensland.

In a statement to the ASX, Qantas said both companies believed the arrangement would have created customer value without lessening competition but acknowledged there was “no reasonable path forward for the deal at present”.

Former CEO Alan Joyce first signalled Qantas’ plan to take over Alliance when the larger airline bought a 20 per cent stake in the Brisbane-based operation for $60m in February 2019.

At the time, he described Alliance as “well managed with a lot of potential”.

After a lengthy investigation by the ACCC into the purchase, Qantas made its move to buy the remaining 80 per cent in 2022, offering $4.75 worth of Qantas shares for each Alliance share.

The ACCC again launched another investigation, and declared its opposition to the proposed acquisition in April on the basis it would lessen competition and reduce service quality.

Mr Joyce indicated Qantas was exploring legal avenues to push ahead with the deal, but Thursday’s announcement suggested Ms Hudson had hit that on the head.

Qantas would retain its 20 per cent shareholding in Alliance, and continue with a long-term agreement that meant the smaller carrier operated up to 30 E190s for Qantas.

QantasLink CEO John Gissing said the last four of those aircraft would join the fleet from April next year.

“Alliance is an important partner for the Qantas Group and the E190s have helped us open new routes across Australia,” Mr Gissing said.

Alliance’s board and management had unanimously supported the Qantas takeover offer, but was getting on with its core business of providing FIFO service to 15 resource and mining companies.

In its annual results released in August, Alliance revealed it had spent $4.7m on legal fees related to the Qantas scheme of arrangement and ACCC compliance.

Managing director Scott McMillan said Alliance looked forward to continuing their longstanding and productive relationship with Qantas, despite the outcome of the transaction.

The decision to terminate the deal rather than fight the ACCC in court, comes ahead of the first hearings in a matter brought by the consumer watchdog against Qantas.

The ACCC has accused Qantas of false, misleading or deceptive conduct over the alleged sale of tickets on more than 8000 already cancelled flights between May and July 2022.

Qantas has insisted no customer paid a fee for no service and is yet to file its defence in the matter.

Federal Court Justice Helen Rofe will hold a case management hearing on November 8.

Following the decision to terminate the Alliance transaction, Qantas shares fell, closing down 2.5 per cent on Thursday at $4.74 while Alliance shares were steady on $3.15.

Originally published as Qantas shelves Alliance takeover plan after opposition from the ACCC