Qantas has signed a three-year partnership with Destination NSW putting domestic tourism front and centre, as the airline faces fresh concerns from Australia’s competition and consumer watchdog over its stake in Alliance Airlines.
The ACCC has released a statement expressing preliminary competition concerns about Qantas’ acquisition of a 19.9 per cent stake in Alliance Airlines, which took place on 1 February.
Qantas announced its acquisition in Alliance Airlines, for a total of $60 million, however, in a statement to shareholders, Alliance said its board was not warned by Qantas about its acquisition move.
Brisbane-based Alliance supplies charter air services to corporate customers in Queensland, the Northern Territory and Western Australia; mainly mining and resources companies requiring services for their fly-in-fly-out workforces. Alliance competes strongly with Qantas for this business, either in its own right or in cooperation with Virgin under the Charter Alliance Agreement.
Alliance is also Qantas’ only competitor on regular passenger transport routes between Brisbane and the important regional centres of Bundaberg and Gladstone.
“Alliance Airlines is a close, important and growing competitor to Qantas, including through its partnership with Virgin. It provides consumers and companies with a crucial alternative to Qantas in markets that are already highly concentrated,” ACCC chair Rod Sims said.
“Qantas did not seek informal merger clearance from us before it acquired this stake in Alliance, which made Qantas Alliance’s biggest single shareholder.”
“We consider this shareholding has the potential to impact Alliance’s future growth and its ability to be a strong competitor. It may impact Alliance’s ability to grow through raising funds from investors, or to consider rival takeover approaches. It may also impact whether Alliance’s customers perceive it to be an independent rival to Qantas.”
“In our view, any move by one company to acquire and build on a significant stake in a close competitor is likely to raise competition issues, due to the potential for the two businesses to compete less vigorously, or to influence each others’ strategies or outcomes.”
Qantas has responded to the ACCC’s concerns, stating it remains a passive investor in the airline.
“We do not believe there is any evidence of a lessening of competition as a result of our minority stake, nor any reasonable prospect that there will be. To the contrary, Alliance Aviation has extended the services it offers to the market in recent months,” Qantas said in a statement.
“We respect the role of the ACCC and have agreed not to expand our shareholding in Alliance while the ACCC continues its investigation. We continue to cooperate fully with the ACCC’s inquiries.
“Qantas has been completely transparent in its goal to ultimately seek ACCC permission to take a majority stake in Alliance, but acknowledges the regulatory challenges this poses. Our current stake is not contingent on reaching a majority position.”
This comes as Qantas and Destination NSW enter a three-year marketing agreement designed to attract more tourists to the State.
The joint agreement, worth almost $25 million, will focus on promoting New South Wales across Australia and key international tourism markets including the USA, United Kingdom and Singapore.
The new agreement focuses on digital and social media platforms, trade partner campaigns, public relations activities, and trade and media visits.
Qantas domestic CEO Andrew David said Qantas was the largest private investor in Australian tourism and was pleased to promote New South Wales on the global stage.
“As the national carrier, we know the importance of tourism in Australia and the value of partnerships like this to the tourism industry and the state economy,” David said.
“Through this partnership we’re continuing our efforts to encourage more people from around the world and Australia to experience everything that New South Wales has to offer.”