Qantas has officially ended its pursuit of a A$614 million takeover of Australian-based charter operator Alliance Aviation Ltd six months after the Australian Competition and Consumer Commission (ACCC) opposed the deal.
The companies said in a joint statement that while they believed the acquisition would have created customer value without reducing competition, they “acknowledge that there is no reasonable path forward for the deal at present”.
Australia’s national carrier cited costly legal battles as a reason for its decision to scrap the deal.
“Qantas will continue to serve the growing resources sector through its existing charter operations; it currently has around 27% of the total charter market,” the statement read.
Partnership to continue
Qantas has a near 20% stake in Alliance, which it said it would retain through a long-term agreement for the charter airline to operate up to 30 E190s for the Qantas group.
The airline has agreed to exercise options over four additional aircraft under that agreement, which will bring the total number of E190s operated by Alliance for the Qantas Group to 26, with four options remaining.
The additional aircraft are expected to join the Qantas fleet from April 2024.
“Alliance is an important partner for the Qantas Group and the E190s have helped us open new routes across Australia,” Qantas group executive of Associated Airlines and Services John Gissing said.
“These four new aircraft will provide additional capacity and connectivity in the domestic market.”
Renumeration objection
Separately, The Age reported that Institutional Shareholder Services (ISS), a third proxy adviser, has joined Ownership Matters and Glass Lewis in advising against the company’s planned remuneration for its executives at the upcoming annual meeting next month.
ISS also recommended that performance rights for Qantas’ newly-minted chief executive officer Vanessa Hudson should not be granted.
Ownership Matters further cautioned shareholders against re-electing director Todd Sampson as his long tenure on the board and marketing background meant he had a “heightened responsibility” for the airline’s reputation decline.
Sampson has been on the Qantas board for the past eight years.
His re-election has not been opposed by ISS or Glass Lewis, with ISS stating that some form of board continuity is needed at this critical time for the airline.
Promoting competition
Meanwhile, the ACCC continues to tighten scrutiny on airline competition following the COVID-19 pandemic, having rejected multiple joint-airline partnerships this year, including Virgin Australia (ASX:VAH)'s alliance with Alliance and Qantas’ code-share agreement with China Eastern.
RBC analyst Owen Birrell pointed out the rising risk that ACCC might also deny future partnerships involving Qantas.
“We note the rising risk that a similar argument could be made by the ACCC in reference to (Qantas’) other ‘partnership-style’ arrangements as they come due, namely with Emirates (due 2028) and American Airlines (NASDAQ:AAL) (due 2026),” Birrell said.
Qantas was granted conditional approval to continue its partnership with Emirates in August.
It was also granted approval to continue co-ordination with its low-cost carrier Jetstar in the Asia-Pacific region in April but its application to extend its partnership with Japan Airlines was rejected in 2021.