Qantas (ASX: QAN) has announced that it has purchased a 19.9 per cent stake in regional charter flight operator Alliance Airlines (ASX: AQZ), but the deal could still be undone.
Shares in Alliance have soared on the back of Qantas' transaction, with shares up 12.61 per cent to $2.59 per share before noon AEDT.
However, the investment by Qantas, worth $60 million, still requires approval from the ACCC.
In 2016, Virgin attempted to strike up a partnership with Alliance which was criticised by the consumer watchdog.
At the time, commissioner Sarah Court said that if Virgin and Alliance were given the go ahead to pursue the partnership it would curtail competition in Western Australia without providing justified benefits.
Virgin Australia at the time operated its own regional charter flights from Perth airport.
In this instance, Qantas also operates its own regional flights under the name QantasLink.
Qantas, Australia's largest aviation player, says it will seek regulatory approval from the ACCC with a longer-term view of taking a majority position in Alliance Airlines.
The company says Alliance is a significant service provider with major strengths in WA and Queensland.
"Alliance is a profitable, well-managed business with high levels of operational maturity," says Qantas.
Qantas chief executive Alan Joyce said in a memo to staff that the company sees a valuable future in the resources sector in WA and Queensland.
"We don't intend to have any involvement in the management of Alliance as a result of this transaction," says Joyce.
"Similarly, there is no impact on our own operations or our commercial arrangements with Alliance as a result of this announcement."
"Ultimately, we'd like to take a majority stake in Alliance in order to better serve the resources market."
Alliance made a statement to the ASX this morning saying that it had not been approached by Qantas with regard to Qantas' major media announcement.
Alliance will release its half-year results next week.
Shares in Qantas are down 1.10 per cent to $5.38 per share.
Business News Australia