Qantas puzzled by ACCC decision to block takeover of Alliance

Qantas puzzled by ACCC decision to block takeover of Alliance

Qantas says it will seek more information from the Australian Competition and Consumer Commission (ACCC) following its decision to oppose the planned acquisition of Alliance Aviation Services Ltd (Alliance), and says it remains confident the acquisition would not substantially lessen competition in any market.

In a statement this morning, the ACCC “concluded that the transaction is likely to substantially lessen competition in markets for the supply of air transport services to resource industry customers in Western Australia and Queensland.”

“We consider Alliance to be an important competitor to Qantas, and the removal of Alliance is likely to substantially lessen competition threatening increased prices and reduced service quality for customers,” ACCC Chair Gina Cass-Gottlieb said.

“Qantas and Alliance currently strongly compete with each other in markets where there are few effective alternatives. The proposed acquisition would combine two of the largest suppliers of charter services in Western Australia and Queensland.”

“Flying workers in the resource industry to and from their worksites is an essential service for this important part of the Australian economy, so it is critical that competition in this market is protected,” Cass-Gottlieb said.

The ACCC also received considerable feedback that Alliance is strongly valued by customers as a particularly vigorous and effective competitor.

“For many customers, Alliance is the preferred supplier due to its large fleet capacity, customer-centric approach and high-quality service offerings, including having the highest on-time-performance in the industry and demonstrated flexibility and willingness to meet customer needs,” Cass-Gottlieb said.

“Alliance doesn’t sell seats on major passenger routes, so many Australians may not have heard of them, but it is one of Australia’s most significant airlines, with 70 aircraft currently and more on order.”

“Combining such an important player with Australia’s largest airline, Qantas, would be likely to substantially lessen competition and is something we oppose,” Cass-Gottlieb said.

As well as reviewing the announcement released today, Qantas has requested a meeting with the ACCC to understand its decision, which is at odds with the increasingly competitive nature of the segment and views expressed by a competitor that the acquisition would not lessen competition.

“Australia has one of the most competitive aviation industries in the world. That competitive dynamic is intensifying with new entrants and expansion of existing carriers and significant growth in the resources sector,” the airline said in a statement.

The airline pointed out that since Qantas announced it had reached an agreement to fully acquire Alliance in May 2022, competitor Rex has acquired charter operator National Jet Express from Cobham Aviation, a transaction that received ACCC clearance within 11 days, and Virgin Australia has been clear about its plans to expand its own resources flying. Several other airlines and aviation businesses also offer charter services.

“The proposed acquisition of Alliance would enable Qantas to service this important sector better, particularly through the efficiencies unlocked through a combined fleet of similar aircraft,” it said.

“Qantas first flagged its long-term interest in ultimately acquiring 100 per cent of Alliance when it bought just under 20 per cent of the charter operator in February 2019. The ACCC investigated that minority holding for three years and made no findings that it lessened competition.”

Qantas is also Alliance’s biggest customer, wet leasing 18 Embraer aircraft that are operated on the national carrier’s behalf on a number of routes.

Qantas in February announced options for up to 12 additional E190 aircraft to be wet leased from Alliance to provide increased capacity and network connectivity in the domestic market.

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