Qantas ‘on notice’ over Alliance shareholding

The competition watchdog has put Qantas on notice over the airline’s 19.9 per cent stake in smaller rival Alliance.

Grounded Qantas aircraft parked at Brisbane Airport. Picture: AAP

The competition watchdog has put Qantas on notice over the airline’s 19.9 per cent stake in smaller rival Alliance, as an “enforcement investigation” continues.

The Australian Competition & Consumer Commission began examining the acquisition in February 2019, after Qantas bought the significant shareholding and declared its intention to eventually take over Alliance.

At the time, Qantas CEO Alan Joyce described Alliance as a “well-managed airline”, well-­positioned to take advantage of increasing activity in the resources sector.

ACCC chairman Rod Sims said their investigation would continue indefinitely in an effort to reduce the risk of any anti-competitive behaviour in Australia’s highly concentrated aviation industry. “It is a bit of a cat-and-mouse game, because it is a very unusual thing to do for a company to take 19.9 per cent of its close competitor,” Mr Sims said.

“They had to know it was going to cause us concerns but they didn’t even bother to ask us.”

He confirmed the ACCC had toughened its language, by now referring to the examination as an “enforcement investigation” instead of a “standard merger review”. The intention was to leave Qantas in no doubt that the ACCC would seek to enforce the law, if any anti-competitive behaviour was observed, Mr Sims said. “There’s a whole range of ways this could play out, for example if there was an equity raising by Alliance (of which there are no plans to do so) and the Qantas shareholding was to be blocker,” he said. “That may give us the evidence we need.”

A Qantas statement said the carrier continued to co-operate with the ACCC, and rejected any suggestion the 19.9 per cent stake had any impact on competition.

“Since Qantas became a shareholder, Alliance has continued to expand in competition with Qantas and others in the charter market,” the statement said.

Qantas also stressed that the shareholding was “entirely passive”, and the airline had not sought board representation or had any influence on the management of Alliance.

Alliance managing director Scott McMillan declined to comment on the 16-month investigation, saying only that they were watching closely.

A note from Credit Suisse research analysts’ Matthew Nicholas and Daniel Coughlan said it was clear the ACCC was taking a “dim view of the acquired stake” and had virtually ruled out the idea of Qantas buying more of Alliance. “Therefore the notion of a takeover has been given what appears to be very close to a provisional red light,” said the analysts.

Mr Sims also had a word of warning for Qantas as Virgin Australia emerged from the administration process.

“If they were to try to grab more space at airports, if they were to seek to get more slots, if they were to put a massive number of aircraft on routes that they knew Virgin was emerging to, we would not tolerate that,” he said.

“The new section 46 (of the Competition and Consumer Act) is very helpful in this regard.”

Qantas shares closed up 0.5 per cent for the day at $4.01 and Alliance shares finished Monday’s trade down 1.1 per cent at $2.62.