The Alliance Aviation Services Ltd (ASX: AQZ) share price is on cloud nine on Thursday morning amid its courtship by a much bigger player in the airline industry.
At the time of writing, shares in Australia’s leading charter flight operator are commanding a $4.35 price tag, up 23.9%. In earlier trading, they hit a high of $4.48. The excitement among investors of Alliance is the byproduct of a $764.5 million bid from airline giant, Qantas Airways Limited (ASX: QAN).
What is propelling the Alliance share price higher?
Longer-term Alliance Aviation shareholders were aware of the interest from Qantas since February 2019. Back then, the largest airline operator in Australia took a 20% equity interest in Alliance as Qantas found itself being its largest customer.
Today, Qantas has made it evident it wants to take that relationship one step further by acquiring Alliance. To do so, the kangaroo-bearing airline is willing to pay one Qantas share per Alliance share — equivalent to $4.75.
The offer represents a 35% premium to the Alliance Aviation share price at the end of yesterday’s session. However, the market has not responded by bidding up Alliance shares to the full $4.75. This suggests some unsureness about whether the deal will proceed or if future dividend payments will reduce the payment.
Notably, Alliance currently serves Virgin Airlines as a customer through its wet-leasing arrangement. However, if Qantas was to acquire the smaller company, this arrangement would be severed in favour of prioritising QantasLink flights.
Catching a flight on the mining boom
Amid the flying Alliance share price, Qantas made no secret that its interest is partly related to the growing resources sector. Highlighting this, Qantas CEO Alan Joyce said:
The resources sector continues to grow and any new tender for airline services will be very competitive. It makes a lot of sense for us to combine with Alliance to improve the services we can offer, which is a positive for both airlines as well as the travelling public.
As reported by ABC News, the Australian mining industry is witnessing conditions similar to that of the 2010 boom. An indicator of this was the record $3.17 billion of capital raised by the sector during Q4 2021.
In light of today’s gain, the Alliance Aviation share price is now up 6% since the start of the year. Lastly, more details will be shared by the company as it progresses through the deal.
Meanwhile, the Qantas share price is down 1.15% to $5.605 at the time of writing.