The Australian Competition & Consumer Commission (ACCC) has stated its opposition to Qantas Airways’ plan to fully acquire Alliance Aviation Services.
The ACCC feels that the acquisition would hurt competition in the air services market that supports the resources sector in the states of Queensland and Western Australia.
“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,” says 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 Australian and Queensland.”
The ACCC based its decision on feedback that shows Alliance is a “particularly vigorous and effective competitor.” It also looked at the competitive landscape provided by Virgin Australia, National Jet Express (which was recently acquired by Regional Express, or Rex), and other carriers.
“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,” says Cass-Gottlieb.
She also pointed out the obstacles facing new airlines and airlines that want to scale up, citing access to training, air crew, engineers, aircraft, and infrastructure.
Qantas and Alliance issued statements expressing disappointment and questioning the ACCC’s decision.
Both insist that the proposed deal would not hurt competition in the market, with Qantas requesting a meeting to better understand the decision.
“We are disappointed with the ACCC’s decision today to oppose the Qantas acquisition. While we respect the ACCC and its processes, we remain of the view that there is a strong industrial logic for Alliance to be part of the Qantas Group and that the proposal does not substantially lessen competition,” says Alliance managing director Scott McMillan.
“We also think there is a compelling case that the proposed transaction will lead to superior outcomes both for Alliance shareholders and for our customers.”
In May 2022, Qantas said it would acquire the 80% of Alliance Aviation that it does not already own for A$614 million ($412 million).
Cirium fleets data shows that Alliance’s fleet comprises 67 aircraft. These include 23 Fokker 100s and 14 Fokker 70s used to support customers in the resources segment. Alliance also operates 18 Embraer E190s that it wet leases to Qantas. In February, Qantas executed options to wet lease 12 additional E190s from Allliance.