UPDATE - Qantas CEO Alan Joyce is optimistic that his airline will be granted the full acquisition of Alliance Airlines. The Australian Competition and Consumer Commission (ACCC) raised concerns in an interim ruling in August, but Joyce thinks the commission might lift its objections, he told AirInsight at the World Aviation Festival in Amsterdam. Qantas CEO sees solid case for Alliance acquisition. Qantas said in May that it intended to acquire the remaining 80.1 percent of Alliance Airlines, already owning the rest of the carrier. Alliance is an important asset to Qantas, as it has an agreement to wet-lease eighteen Embraer E190s to QantasLink for use on regional routes. The ACCC said in August it is concerned that a Qantas-Alliance combination will significantly lessen competition, notably in Queensland and Western Australia. The commission is supposed to make a final ruling on November 17, but Joyce said it could take some extra time. The ACCC says on its website that it wants allow parties more time and has set a new proposed date for its decision on December 1. The CEO isn’t worried about the outcome, on the contrary: “We are still confident that we have a really good case with the competition authorities. Interestingly, there were only two red lights in the interim approval, areas of concern, and we are working through them to explain them to the ACCC. One of the concerns was that Qantas would have such a dominant position in the charter market. But one of our competitors, Rex Airlines which owns Cobham, said that’s essentially nonsense. There are low barriers to entry, they can be a real good competitor, they can offer lots of services. As a competitor, they discounted that I am sure the ACCC will take that on board. The customers of them are the big mining customers and they have countervailing market power. So we do believe there is a really strong case.” Joyce added: “The ACCC changed their minds from interim to a full determination on things like the Emirates deal (the joint venture with Qantas announced in 2013). It was originally a no and they changed to a positive. China Southern (2014) was a no and they changed to a positive. So we have real hope that we can persuade the ACCC.” The consumer watchdog said one of the considerations before approving the deal could be to force Alliance Airlines to sell its (wet) leasing business, but according to Joyce that makes hardly any difference: “The wet-lease department is ours. There is a small wet lease component to Virgin Australia and there are options to keep that going. And Rex has said that they could fill the gap. Most of the eighteen E190 aircraft we wet lease, so we are half of Alliance’s revenues. It doesn’t make sense for us to offload our part when their major customer is us.” Asked if Qantas had a plan B if the ACCC rejects the acquisition, Joyce said: “We have to be constructive with the ACCC but we do believe we have a very solid case. There is an appeal with the ACCC, we could go to the courts, but we hope not to get to that stage.” Alan Joyce speaking to Bloomberg's Guy Johnson during the World Aviation Festival. Next to him are KLM's new CEO Marjan Rintel and IATA Director-General Willie Walsh. (Richard Schuurman) Resilient operations During a panel discussion at the World Aviation Festival, Joyce shared some updates on how Qantas is recovering. He said that the strong recovery that Qantas reported in its FY22 results in August continues. Domestic operations are at 100 percent of 2019 levels, while international is recovering quickly and is close to eighty percent capacity. As it shifted from two Covid years of low level of operations to almost high gear, Qantas suffered from various operational issues. When Omicron kicked in, sick leave rose to record-high levels, and bad weather struck the country. The situation is now under control. “For us, we are just about back to normal. This week, our on-time performance is back in the high seventies, and cancelation levels are below one percent. But Covid hasn’t gone and we all have to be on alerts, so we are very cautious about adding back all the capacity that we have.” Domestic capacity should be at 120 percent of 2019 levels in April, but right now, Qantas wants to be more resilient: “Right now, we have twenty percent of the capacity on standby, so we are at 100 percent. And we will stick at those levels until we know there are no further waves of Covid that spike sick leave and are going to cause problems. We are going to keep a lot of people and aircraft in reserve to make sure we can treat them.” International traffic is building back at a slower pace. “We see capacity in and out of Australia from our competitors around sixty percent of pre-Covid levels. We are at 75, every flight is full. The complexity is now that if something goes wrong, a flight to for example LA goes unserviceable, you used to be able to book passengers on your competitors’ flights, and your partners, and move people around. Nowadays, we can’t, you have to look after your own operations.” Joyce continued: “That’s why we are essentially having three spare aircraft holding over Christmas and New Year. We have to have redundancy into the system. This is one of the reasons why airfares are higher today than before Covid.”
