Qantas has been eyeing up the full acquisition of Alliance Airlines, a booming regional airline that focuses on the rich mining sector in Australia. Qantas, who already owns 20% of the airline, is waiting for the Australian Competition and Consumer Commission (ACCC) to approve the deal.
Who are Alliance Airlines?
You’d be forgiven if you’ve never heard of Alliance Airlines. They are a small charter airline company that operates FIFO (Fly In, Fly Out) services for mining sites. Many miners have very expensive contracts that include weekly or sometimes daily flights to and from major cities, as to allow them to live a normal home life whilst working in the harsh Australian outback.
These airline contracts are incredibly lucrative and have lead to several airline start-ups in the space, such as Alliance Airlines based out of Brisbane and Perth and Network Aviation in Perth.
Alliance Airlines has quite a large fleet for a charter airline, with:
- 27 F100s
- 5 Fokker 50s
- 15 Fokker 70s
These aircraft are based out of hubs in Perth, Australia, and Brisbane, Australia, which are close capital cities to mining regions.
Alliance Airlines has flown services under the Qantas banner before, but currently operates exclusive mine site contracts. It has wet-leased several aircraft to Qantas’ competitor, Virgin Australia.
Why is Qantas interested in them?
Qantas has already seen the potential of the mining contract space and acquired Perth based Network Aviation back in 2011. Network Aviation has two A320s and 17 Fokker 100s.
Qantas increasing its stake in Alliance Airlines from 20% to 100% would allow them to easily expand the market, without investing in more Network Aviation. To grow Network Aviation would be very costly in terms of aircraft acquisition, logistics, and personnel expansion.
“We could continue growing organically but it’d take a lot longer. Buying Alliance Airlines would mean the capability to grow more rapidly,” CEO Alan Joyce said to CH Aviation.
But such a purchase is difficult, as it would mean that the mining contract space is dominated by a Qantas monopoly. Thus, it will need to be approved by the ACCC, who are looking for evidence that Qantas won’t create unfair market conditions and/or will have no control over the subsidiary.
What happens if the sale goes through?
Regarding the sale, Qantas was quick to point out that their short term plan is to leave the management and operation of Alliance Airlines unchanged. They will then look at how they can best integrate the two airlines, Alliance and Network, to take advantage of economies of scale in maintenance and personnel.
“We made our intentions clear, our medium- to long-term objective is to try a full take-over of Alliance Airlines. We think there is a lot of synergies with Network Aviation which flies the same Fokker 100 aircraft. We think it would bring scale benefits,” said Joyce, in the same interview.
At this stage, it is unknown what will happen to Alliance Airlines wet-lease contracts with Virgin Australia, after all, it would be rather odd that Qantas is renting aircraft to their competitor but stranger things have happened.
What do you think about this sale? Can Qantas’ march onwards be stopped? Let us know in the comments.