ACCC raises concerns over Qantas’ acquisition of Alliance Airlines

The Australian Competition and Consumer Commission (ACCC) has flagged concerns with Qantas Airways’ proposed acquisition of Alliance Airlines in a statement released today.

Both Qantas and Alliance provide air travel services for corporate customers flying to rural and remote areas. These airlines are closely in competition for the supply of remote air travel to mining and resources companies who need ‘fly-in fly-out’ workers in Queensland and Western Australia.

“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 chair Gina Cass-Gottlieb said.

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

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

This acquisition would remove Alliance as Qantas’ only competitor on the Brisbane-Moranbah regional passenger route. The ACCC is considering the level of competition provided by airlines such as Virgin and Cobham’s regional services arm, which was acquired by Rex last month.

The flying kangaroo reaffirmed its view that its acquisition of Alliance would not lessen competition in Australia’s charter flight segment.

In February 2019, Qantas acquired under 20 per cent of Alliance. The national carrier flagged its long term interest in eventually acquiring 100 per cent of the charter airline and said that the ACCC investigated the minority holding for three years and made no findings that it lessened competition.

The national carrier announced in May that it reached an agreement to fully acquire Alliance, which supplies about 30 per cent of the charter services. The rest fall between Qantas (23 per cent), Virgin Australia (22 per cent) and a number of smaller operators.

Qantas Group executive of associated airlines and services John Gissing said the airline would continue to work with the ACCC to ensure any competition concerns were addressed.

“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,” 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.”

The ACCC is considering how the removal of Alliance’s leasing services would impact the potential for current and new entrants to compete against the flying kangaroo on regional routes.

“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,” 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.”

The ACCC has invited submissions from interested parties in response to the statement of issues by 1 September. The ACCC’s final decision is scheduled for 17 November 2022.

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