The Australian Competition and Consumer Commission (ACCC) will block the bid by Qantas (QF, Sydney Kingsford Smith) to acquire a 100% stake in Alliance Airlines (QQ, Brisbane International), saying the deal would likely substantially lessen competition among resource industry customers in Western Australia and Queensland.
In response to the April 20, 2023, decision, Qantas say it is seeking more information from the regulator and has sought a meeting to "understand its decision." Qantas already owns a 19.9% stake in Alliance Airlines and in May 2022 announced its intention to acquire the remaining 80.1%.
"We consider Alliance to be an important competitor to Qantas," said ACCC Chair Gina Cass-Gottlieb. "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 resources 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."
ch-aviation is aware that the ACCC has extensively canvassed Alliance's resource customers and airline industry competitors. The ACCC says customers valued Alliance as a "vigorous and effective competitor" to Qantas as well as appreciating the airline's fleet flexibility, customer-centric approach, and high-quality service offerings. The ACCC concludes this could be lost if the airline is swallowed by Qantas. In its earlier preliminary findings, the ACCC had flagged it may oppose the takeover.
"Qantas will face limited competition if allowed to acquire Alliance because most other airlines lack the right aircraft, fleet size, or capabilities needed to compete effectively," said Cass-Gottlieb. Alliance Airlines operates a fleet of fourteen F70s, twenty-five F100s, three ERJ 190-100LRs, and twenty-five ERJ 190-100ARs. In addition to wet-leasing eighteen Embraers to Qantas, Alliance has long standing wet lease agreements with Airnorth (Australia) (TL, Darwin) and Virgin Australia (VA, Brisbane International). Like Qantas and its subsidiary Network Aviation (NWK, Perth International), Alliance Airlines also has extensive charter contracts across the mining and resource sectors in Australia. Other competitors in this sector include Virgin Australia (VA, Brisbane International) and its subsidiary Virgin Australia Regional (VA, Perth International), National Jet Express (JTE, Adelaide International), and Skytrans (QN, Cairns).
A Virgin Australia spokesperson told ch-aviation that they welcomed the ACCC's decision. "Qantas is already the dominant carrier in the Australian domestic aviation market and has the largest share of charter operations," the spokesperson said. "It is clear the ACCC has serious concerns about the proposed acquisition, its implications for competition in the Australian aviation market and its impact on charter customers."
Rex - Regional Express (ZL, Wagga Wagga), which acquired contract charter operator National Jet Express last year, declined to comment on the ACCC decision but in its 2022 submission concerning the matter, offered conditional support on the proviso that the merged entity would continue allowing ongoing access to Alliance's E190 simulator, the only one in Australia, as well as maintaining an arrangement whereby other operators can source E190 parts from Alliance on an emergency/AOG basis as presently happens. Rex also wanted to maintain this status quo at fair market prices. National Jet Express operates five E190-100ARs and one E190-100LR.
Qantas says Australia has one of the most competitive aviation industries in the world and there are new airline entrants and significant expansion in the resources and mining sectors. The airline notes that the sector's customers, large mining and resource companies, are sophisticated and well resourced and have strong bargaining power when negotiating their charter contracts.
"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," says a statement issued by Qantas in response to the ACCC's decision. The airline maintains that the decision runs against the competitive nature of the sector. Qantas did not return ch-aviation's phone calls.
