ACCC raises alarm over Qantas’ takeover bid for Alliance Airlines

A bid by Qantas to buy out one of its rivals has corporate regulator the ACCC warning reduced competition will lead to price rises.

Alarm has been raised over Qantas’ proposed acquisition of a small regional company which Australia’s competition regulator believes could jeopardise the country’s “well-functioning” aviation sector.

The Australian Competition and Consumer Commission on Thursday announced it would

be closely monitoring the airline’s move to acquire Alliance Airlines amid concern it could reduce competition.

Qantas and Alliance typically compete closely in the supply of “fly-in fly-out” flights for mining and resource companies transporting workers in Queensland and Western Australia.

The ACCC suspects the acquisition would make it even more difficult for other airlines to enter or expand operations in regional and remote areas.

A proposed Qantas acquisition has landed the airline on the ACCC’s watch list. Picture: NCA NewsWire

“We are concerned that this proposed acquisition is likely to substantially lessen competition for air transport services to and from regional and remote areas in Queensland and Western Australia for corporate customers,” ACCC chairwoman Gina Cass-Gottlieb said.

“This merger would combine two of the top three operators of air transport services in Queensland and Western Australia.”

Ms Cass-Gottlieb said the ACCC had already received complaints about the proposition from industry participants concerned over what it could mean for regional and remote areas.

If Qantas acquires Alliance, there would be no other competition on the Brisbane-Moranbah regional passenger transport route, the ACCC said.

The regulator added it was considering the level of competition provided by airlines including Virgin and Cobham’s regional services arm, which was recently purchased by Rex.

It was also taking into account how removing Alliance’s aircraft leasing services would affect the ability of current and new entrants to compete against Qantas on regional routes.

The ACCC holds concern Qantas acquiring Alliance would compromise Australia’s aviation sector. Picture: Lyndon Mechielsen

The small airline provides wet leasing of its medium size aircraft to other airlines, which involves the lease of a plane, crew, and other related services to other airlines or businesses.

Wet leases typically are used by airlines to expand into new routes or provide temporary capacity increases.

“Our preliminary view is that there are already significant barriers for airlines who want to enter or expand their operations in regional and remote areas, including access to pilots, airport facilities and infrastructure, and associated regulatory approvals,” Ms Cass-Gottlieb said.

“The removal of Alliance as a supplier of wet leases or the increase in price of wet leases for Qantas’ competitors is likely to significantly increase these barriers.

“A competitive and well-functioning aviation sector is fundamental to the Australian economy. “We will closely scrutinise all mergers that may reduce competition in this sector.”

Qantas doubles down

Qantas has maintained its proposed acquisition of Alliance Airlines “would not lessen competition in Australia’s highly-competitive charter segment”.

The major airline has argued there would still be adequate competition in the sector given Rex’s recent acquisition of National Jet Express from Cobham Aviation, and Virgin Australia’s acquisition of new aircraft to expand its own resources.

Qantas said there were also “several other airlines and aviation businesses” servicing the charter sector.

In addition, Qantas said Alliance represented about 2 per cent of the total Australian aviation industry and supplied about 30 per cent of the charter services.

Remaining services were split between Qantas, which made up for 23 per cent and Virgin Australia, which accounted for 22 per cent, with “a number of other operators” making up for the rest.

Qantas further argued that when it bought just under 20 per cent of Alliance in February 2019, it flagged its long-term interest in ultimately acquiring 100 per cent.

The airline said the ACCC investigated the acquisition for three years and made no findings about it lessening competition.

Qantas maintains the acquisition would not reduce competition levels. Picture: NCA NewsWire

Qantas Group Executive of Associated Airlines and Services John Gissing said the airline would continue working with the ACCC to address its concerns.

“Australia has one of the most pro-competitive aviation industries in the world, as shown by the post-Covid expansion of carriers domestically and growth in the resources sector itself,” Mr Gissing said.

“There are a significant number of charter operators of different sizes and that makes it an extremely competitive segment. We’re confident our acquisition of Alliance does not substantially lessen that competition and we’ll work through the ACCC’s process to support that position and address their initial concerns.

“As the ACCC has previously acknowledged, customers in the resources flying segment are sophisticated and well-resourced companies with procurement expertise who have strong bargaining power in their negotiations with airlines and other operators.

“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.”

The ACCC has invited submissions from interested parties until September 1. It will announce its final decision on November 17.