Australia’s competition watchdog has expressed preliminary concern with Qantas’s proposed acquisition of Alliance Aviation Services, arguing the takeover is likely to substantially lessen competition for air transport services in remote and regional areas.
In a statement of issues released on Thursday, the Australian Competition and Consumer Commission responded to Qantas’s proposal to take over the ASX-listed fly-in, fly-out carrier ahead of a final decision in November.
A final decision on the deal will be made in November. Credit:Kate Geraghty
Alliance Aviation Services represents about 2 per cent of the total aviation industry and is primarily used by mining and resource companies needing to transport workers in Queensland and Western Australia. It supplies 30 per cent of charter services, with the remainder split between Qantas (who owns about 23 per cent), Virgin (who owns 22 per cent) and a number of smaller operators.
Qantas acquired a 19.9 per cent holding in Alliance Aviation Services in 2019. In May, Qantas announced it had reached an agreement with Alliance to acquire the remaining 80 per cent stake and made a submission to the ACCC.
If successful, the merger will combine two of the top three operators of air transport services in Queensland and Western Australia. It would also remove Alliance as the only competitor to Qantas on the Brisbane-Moranbah regional passenger transport route.
“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 on Thursday.
Qantas is not the only airline angling to expand their charter service offering. In July, Rex acquired charter operator National Jet Express from Cobham Aviation, receiving ACCC clearance 11 days later. Virgin Australia has also expressed a desire to acquire new aircraft to expand its own resources flying.
The ACCC said they were considering the level of competition provided by Virgin as well as Rex’s recent acquisition from Cobham as well as how the removal of Alliance’s aircraft leasing services would affect the ability of current and new airlines to compete against Qantas on regional routes
Cass-Gottlieb said there are already “significant” barriers for airlines wanting to enter or expand their regional operations, including access to pilots, airports, regulatory approval and infrastructure. She expressed concerned the removal of Alliance as a supplier of wet-leases, where one airline leases aircraft and crew to another, will “significantly increase” these barriers.
The ACCC will accept submissions in response to their statement of issues until September 1. A final decision will be made by the competition watch dog on November 17, 2022.
Alliance Airlines managing director Scott McMillan said at the time of the deal that combining the Alliance and Qantas fleets would lead to greater efficiencies.Credit:Attila Csaszar
Since 2006, nearly half of all informal merger clearance applications where the watchdog had initially identified competition as an issue were ultimately approved.
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.
“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.
“As the ACCC has previously acknowledged, customers in the resources flying segment are sophisticated and well-resourced companies with procurement expertise who have 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. 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.”
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