One of the best performers on the Australian share market on Friday has been the Alliance Aviation Services Ltd (ASX: AQZ) share price.
In afternoon trade the Australia-based charter operator’s shares are up 9% to $2.51.
Why is the Alliance Aviation Services share price ascending?
This morning Qantas Airways Limited (ASX: QAN) announced that it has acquired a 19.9% stake in the charter operator.
The release revealed that the 19.9% stake was acquired for an average price of $2.40 per share and for a total cost of $60 million.
What is Alliance Aviation Services?
Alliance Airlines is Australasia’s leading provider of contract, charter, and allied aviation services to mining, energy, tourism, and government sectors.
In addition to this, a wide range of specialised aviation services including wet leasing, airport management, aircraft trading, parts sales, and engine leasing are provided in Australia and internationally.
The main attraction for Qantas appears to be its exposure to the resources sector. In the release Qantas noted that the resource sector “continues to stimulate travel demand in Western Australia and Queensland in particular.”
Qantas advised that it expects to ultimately “seek regulatory approval from the ACCC to build on its current shareholding, with a longer-term view of taking a majority position in Alliance Airlines in order to better serve the charter market by unlocking synergies.”
However, for now, it is supportive of the business as usual approach of Alliance Airlines management and will not seek board representation.
Is this a good move by Qantas?
I think the two companies are a good fit for each other, especially given how Alliance has been a long-term provider to the Qantas Group and flies regional services on behalf of it.
All in all, I see this as another reason to invest in Qantas ahead of rivals Air New Zealand Limited (ASX: AIZ) and Virgin Australia Holdings Ltd (ASX: VAH). However, this is on the proviso that oil prices don’t surge higher from here.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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