Australian national carrier Qantas has questioned the Competition and Consumer Commission (ACCC) decision to oppose its planned acquisition of Alliance Aviation Services Ltd.
In a release issued today, 20 April, Qantas stated that it will seek more information from the Australian competition watchdog ACCC with regards to its decision to oppose the planned takeover of Alliance Aviation Services Ltd.
The key criterion dictating the move by the ACCC to deny such an acquisition relates to the potential for a commercial takeover to result in a weakening of overall market competition.
Qantas says that it remains confident that its acquisition would not substantially lessen competition in any market.
As well as reviewing the announcement released today, the airline has now requested a meeting with the ACCC to understand its decision.
The national flag carrier characterises the decision as being “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,” says Qantas in its recent response.
Qantas also pointed out that since it announced it had reached an agreement to fully acquire Alliance in May 2022, its regional competitor Rex Airlines had acquired charter operator National Jet Express from Cobham Aviation.
Qantas drew attention to the fact that the Rex acquisition transaction received ACCC clearance within 11 days.
The ACCC has previously acknowledged that customers in the resources segment are sophisticated and well-resourced with procurement expertise and strong bargaining power in their negotiations with airlines and other operators.
Qantas’ position is that the proposed acquisition of Alliance would enable it to service this important sector better, stating it would do so through “the efficiencies unlocked through a combined fleet of similar aircraft.”
History of the Alliance acquisition
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 the part shareholding lessened competition.
The consumer watchdog ACCC first expressed its concerns on the takeover in August 2022. At the time ACCC Chair Gina Cass-Gottlieb said:
“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.”
“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.”
Qantas is presently 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.
ACCC latest decision
The ACCC released their decision on the proposed 100% acquisition of Alliance by Qantas, saying:
After a thorough investigation of the proposed acquisition, the ACCC has 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.”