Qantas share price on watch after massive acquisition

The Qantas Airways Limited (ASX: QAN) share price will be keenly watched on Tuesday after the company announced a major acquisition this morning.

The airline revealed that it had purchased a 51% stake in “fast-growing online travel business” TripADeal.

The deal gives Qantas a foot into the $13 billion online packaged holidays market, which the airline says is “experiencing significant growth as leisure demand booms”.

“This is a great opportunity at the perfect time,” said Qantas chief executive Alan Joyce.

“Coming out of the pandemic, people want a holiday experience that is special but also tried and tested, and there is a huge shift to booking online.”

Existing owners — TripADeal co-founders Norm Black and Richard Johnston plus private equity firm BGH Capital — retain minority stakes.

The acquisition price was not disclosed, although it may show up in Qantas financial reports later in the year.

The deal gives the airline an option to buy the remaining 49% in four years’ time at “an agreed multiple of TripADeal’s bookings at the time”.

The acquisition is the second in May for Qantas, which reached an agreement to buy out fellow ASX-listed company Alliance Aviation Services Ltd (ASX: AQZ) three weeks ago. The Qantas share price edged slightly into the red on the news.

Fast-growing online business

Before the COVID-19 pandemic, TripADeal reportedly had an annual growth rate of more than 40%. 

Qantas claimed the company had booked more than $200 million worth of services in the 12 months prior to the impact of coronavirus.

“It’s an Aussie success story built on delivering ready-made holidays at very sharp prices, and their level of repeat customers shows how well they do it,” said Joyce.

“Buying a majority stake at the same time means we can benefit from the strong growth that’s going to follow as a result.”

Black said TripADeal already had a close relationship with Qantas.

“Qantas understands why TripADeal is different and what makes it a success, which is why we chose to do this deal with them.”

The Qantas share price has risen 6% so far this year, and 15.7% over the past 12 months. 

Loyalty points an integral part of deal

The airline emphasised the benefits of how customers can now earn Qantas frequent flyer points through bookings made via TripADeal.

Johnston said it was a feature that would boost the online business.

“It’s taken a decade for us to build the relationships direct with suppliers to be able to offer all the experiences we have, and the ability to now use Qantas Points for that is really going to drive our growth in the years ahead.”

According to Joyce, the loyalty points business was a saviour for Qantas while its planes were grounded during the pandemic.

“Despite the lack of flying, members earned and used large volumes of points on the ground, customer satisfaction reached record levels and the business delivered strong earnings for the group,” he said.

“I don’t think any other airline loyalty program managed to do that.”

The post Qantas share price on watch after massive acquisition appeared first on The Motley Fool Australia.

More reading

• 2 ASX blue-chip shares this top fund manager thinks are good value
• ‘Never waste a crisis’: Expert picks one ASX share he’d buy right now
• Zip just joined forces with another ASX 200 company
• Ready for takeoff? Top broker sees smooth runway for Qantas shares in 2022
• 4 ASX shares of the most trusted brands in Australia

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool Australia has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/97R2WP6