Concerns Raised as Qantas’ Proposes to Acquire Alliance

Alliance Airlines Fokker F70 landing at Canberra airport
Bidgee, CC BY-SA 3.0 AU, via Wikimedia Commons

LONDON – The Australian Competition and Consumer Commission (ACCC) has raised concerns with the Australian flag carrier Qantas’ proposal to acquire Alliance Aviation Services Ltd (Alliance airlines). 

Both Qantas and Alliance airlines provide mainly air transport services to regional, hubs and remote destinations throughout Australia for the customer; business and leisure. Qantas currently owns just under 20% of Alliance, and wet leases up to 18 Embraer aircraft, which Alliance operates on Qantas’ behalf.

The two airlines were closely competing neck-on-neck for mining contracts or FIFO fly-in-fly-out workers in the states of Queensland and Western Australia. 

ACCC Chair Gina Cass-Gottlieb raised her concerns in the national flag carrier acquiring Alliance completely:  “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,”

She later added: “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,”

The take over of Qantas would mean Alliance’s sole competition to the Australian flag carrier will be reduced to a monopoly on the Brisbane-Moranbah regional transport route. ACCC is evaluating whether the level of competition provided by other airlines such as Cobham and Virgin’s regional off-shoot which was acquired by Rex not long ago is crossing the line or not. 

The anti-competition watchdog is also evaluating removing Alliance airlines’ aircraft leasing services, which would have an effect on the ability of current and would-be entrants to the market to compete with Qantas on certain domestic routes. 

Alliance is not only an airline, but its other core services is also a key supplier of wet-leased, medium-sized aircraft to other airlines. Wet-lease is a term whereby an airline leases a plane, crew and other related services surrounding the operations of the aeroplane.

Wet-lease is becoming more frequent these days for airlines looking or testing the waters to expand to a new route or a new market, or recently during the capacity shortages in Europe and North America, airlines turned to wet leasing as a short-term solution. 

Ms Cass-Gottlieb furthered expressed her concerns: “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.”

“The removal of Alliance as a supplier of wet leases or the increase in the 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.”

With supply prices skyrocketing, it is worth the ACCC looking into such cases where airfares to key destinations are unnecessarily jacked up, putting pressure on businesses even more.

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