Qantas’s plan to buy Alliance Aviation dealt a blow by ACCC

The airline’s $600m plan to acquire Alliance Aviation would reduce competition in regional and FIFO routes, the ACCC has said.

Qantas’s plan to acquire Alliance Aviation has been dealt a blow after the competition watchdog raised a series of concerns about the proposed $614m deal.

The country’s largest airline first flagged its intention to take over Alliance in February 2019 after buying a 19.9 per cent stake in the Brisbane-based airline.

In May, Qantas announced an agreement had been reached to fully acquire Alliance, subject to the approval of shareholders, and the Australian Competition & Consumer Commission.

After more than three months of consideration, the ACCC on Thursday said its preliminary view was that the sale would lessen competition on regional routes, and in the fly-in, fly-out market.

In a statement, the regulator noted that Qantas and Alliance competed closely in the supply of services to mining and resources companies that needed to transport FIFO workers in Queensland and Western Australia.

“This merger would combine two of the top three operators of air transport services in Queensland and Western Australia,” said ACCC chair Gina Cass-Gottlieb.

“Industry participants have expressed strong concerns about the impact of this proposed acquisition on air transport services, particularly to regional and remote areas.”

The statement noted that the proposed acquisition would also remove Alliance as the only competitor to Qantas on the Brisbane-Moranbah passenger route.

In addition, Qantas would be unlikely to allow Alliance to continue to provide wet lease operations for Virgin Australia on routes such as Brisbane to Emerald, Mt Isa, Alice Springs, Rockhampton and Newcastle,

The ACCC is expected to make a final decision on the acquisition on November 17.

A Virgin Australia spokeswoman said Qantas already had the largest share of charter operations, as the dominant carrier in the domestic aviation market.

QLD_CP_NEWS_JOYCE_12MAR21(2)

“Its proposal to acquire Alliance Aviation has serious implications for competition in Australian aviation markets and consumers will be impacted if competition is reduced,” she said.

Qantas claims the acquisition will not lessen competition in “the highly competitive charter ­segment”.

John Gissing, Qantas group executive for associated airlines and services, said the company would work 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,” he said.

“There are a significant number of charter operators of different sizes and that makes it an extremely competitive segment.”

Mr Gissing said the ACCC had acknowledged that customers in the resources flying segment were “sophisticated and well-re­sourced companies with 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,” he said.

“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.”

Alliance managing director Scott McMillan said he was confident they could “prove their case” to the ACCC. “We will work with the ACCC to show how the deal will be advantageous to all of our customers,” said Mr McMillan.

Since 2006, the ACCC has approved 46 per cent of all informal merger clearance applications in cases where the watchdog identified competition as an issue in its preliminary findings. In addition to the ACCC’s approval, the sale requires the support of Alliance shareholders.

Under the proposed deal, they would receive Qantas shares worth $4.75 for each Alliance share, which closed down 11c at $3.44 on Thursday.

Qantas shares finished the day down 5c at $4.77.

Alliance recently posted its first annual loss in seven years – $7.1m – which was attributed to pandemic-related delays and general industry disruption.