ACCC concerned Qantas’ acquisition of Alliance would lessen FIFO competition

ACCC concerned Qantas’ acquisition of Alliance would lessen FIFO competition

Australia’s competition watchdog has today raised preliminary concerns that Qantas’ (ASX: QAN) proposed acquisition of Alliance Aviation (AQZ) would lessen competition for fly-in fly-out (FIFO) services to regional centres.

In a statement, the Australian Competition and Consumer Commission (ACCC) says the two airlines compete closely in the supply of air transport services to regional and remote areas for corporate customers, specifically mining and resource companies that need to transport FIFO workers in Queensland and Western Australia.

Specifically, the ACCC says the merger would remove Alliance as the only competitor to Qantas on the Brisbane-Moranbah regional passenger transport route, putting the proposed merger which valued Alliance at $919.2 million on thin ice.

“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,” says ACCC chair Gina Cass-Gottlieb.

“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 ACCC also says it is considering the level of competition provided by airlines such as Virgin and Cobham’s regional services arm, which was recently purchased by airline Rex.

Further, the ACCC notes it is looking into how the removal of Alliance’s aircraft leasing services would impact the ability of current and new entrants to compete against Qantas on regional routes.

This is because Alliance is a key supplier of ‘wet-leased’ medium-sized aircraft to other airlines - agreements where an airline leases a plane, crew, and other related services from another airline or business, often used to expand into new routes or provide temporary capacity increases.

“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,” Cass-Gottlieb says.

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

In response to the ACCC’s statement, Qantas has reaffirmed its view that its proposed acquisition of Alliance would not lessen competition in the ‘highly competitive’ charter segment.

Specifically, Qantas points out that Alliance represents just 2 per cent of the total Australian aviation industry and supplies about 30 per cent of the charter services, with the remainder split between Qantas (around 23 per cent), Virgin Australia (around 22 per cent) and a number of other smaller operators.

Qantas also already owns just under 20 per cent of Alliance - an acquisition that was approved by the ACCC in 2019.

“There are a significant number of charter operators of different sizes and that makes it an extremely competitive segment," Qantas group executive of associated airlines and services John Gissing says.

"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.”

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Looking for a credit or charge card that’s built for your business? Try American Express
Partner Content
A good credit card should work for you, not against you, and let you and your business ...
American Express
Advertisement

Related Stories

Bottoms up: Sydney cold brew coffee liqueur brand Mr Black acquired by beverage giant Diageo

Bottoms up: Sydney cold brew coffee liqueur brand Mr Black acquired by beverage giant Diageo

Fast-growing coffee liqueur brand Mr Black is joining a portfo...

Fitness First parent divests franchise division of Jetts Fitness via management buyout

Fitness First parent divests franchise division of Jetts Fitness via management buyout

Jetts Fitness Australia CEO Elaine Jobson has led the acquisition o...

Universal Store buys Byron Bay fashion brand THRILLS for $50m

Universal Store buys Byron Bay fashion brand THRILLS for $50m

After working alongside Universal Store (ASX: UNI) for nine years, ...

Apollo’s merger with THL a step closer after agreeing to sell 80pc of fleet to Jucy

Apollo’s merger with THL a step closer after agreeing to sell 80pc of fleet to Jucy

Apollo Tourism & Leisure (ASX: ATL) and Tourism Holdings (NZX: ...