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Regulator flags concern over Qantas buying Alliance stake

The Australian Competition and Consumer Commission (ACCC) has flagged concerns that Qantas's acquisition of a 19.9% stake in Alliance Airlines in February could reduce competition on some scheduled routes and in the charter market.

The competition regulator states that Qantas and Alliance are the only two airlines that fly from Brisbane to Gladstone and Bundaberg. They also compete directly in the resource charter market, where Alliance works closely with Virgin Australia.

Qantas's 19.9% stake makes it the largest shareholder in Alliance, and the ACCC notes that it did not seek an informal merger clearance before it acquired the stake.

"We consider this shareholding has the potential to impact Alliance’s future growth and its ability to be a strong competitor," says ACCC chairman Rod Sims.

"It may impact Alliance’s ability to grow through raising funds from investors, or to consider rival takeover approaches. It may also impact whether Alliance’s customers perceive it to be an independent rival to Qantas.”

The ACCC has released a "Statement of Issues" on the matter and is accepting submissions from interested parties up to 21 August.

The ACCC launched its investigation into the transaction soon after it was announced to determine if any competition laws may have been broken.

If it can mount a case that those laws have been breached, it could seek a court ruling forcing Qantas to divest its stake or have the transaction declared void.

Qantas responded by stating that it invested in Alliance because it is a "profitable, well-managed business", it has not sought a board seat, and will remain a passive investor in the short term.

"We do not believe there is any evidence of a lessening of competition as a result of our minority stake, nor any reasonable prospect that there will be. To the contrary, Alliance Aviation has extended the services it offers to the market in recent months," it adds.

Qantas also says that its "current stake is not contingent on reaching a majority position", despite earlier signalling that it would seek competition clearance to eventually take control of its Brisbane-based rival.

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