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July 18, 2024
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Qantas is seeking clarity from the Australian Competition and Consumer Commission (ACCC) as to why it is opposing the acquisition of Alliance Airlines. Qantas had been optimistic that the ACCC would rule in favor of the full acquisition, but the commission said today it opposes the initiative as a combination of Qantas and Alliance would negatively affect competition. Qantas seeks clarification from ACCC over objections to Alliance acquisition.

Qantas and Alliance announced in May 2022 that Qantas would acquire the remaining 80.1 percent of Alliance, having taken an initial 19.9 percent share in February 2019. Alliance is operating a major part of Qantas’ regional network within Australia with a fleet of eighteen (wet)-leased Embraer E190s. In February, Qantas said that it intended to grow the Alliance fleet to thirty aircraft by Q1 2025.

In an interim ruling last August, the ACCC already raised concerns about the effect that a full acquisition would have on competition, notably in Western Australia and Queensland. The commission sought further comments from other airlines, stakeholders, and consumers and was supposed to have made a final decision in November, but this was delayed until today.

In its media statement, the ACCC chair Gina Cass-Gottlieb says today: “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. 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.”

The ACCC adds: “Flying workers in the resource 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.”

Customers prefer Alliance

Cass-Gottlieb also referred to comments from customers, many of which fly Alliance to commute to their businesses in the mining industry: “For many customers, Alliance is the preferred supplier due to its large fleet capacity, customer-centric approach and high-quality service offerings, including having the highest on-time-performance in the industry and demonstrated flexibility and willingness to meet customer needs.” 

The ACCC also carefully considered the level of competition provided by other airlines, such as Virgin Australia and National Jet Express (which was recently purchased by Rex), and other smaller market participants. “The ACCC found that it is unlikely a new or existing airline could expand quickly to a scale that would address the loss of competition resulting from the proposed acquisition. 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,” the commission says.

In a reaction, Qantas said that Qantas remains confident the acquisition would not substantially lessen competition in any market.” The airline has requested a meeting with the ACCC to get more information about its motivation to oppose the acquisition. The ACCC’s position is “at odds with the increasingly competitive nature of the segment and views expressed by a competitor that the acquisition would not lessen competition.” This is a reference to Rex, which said in September that it didn’t oppose the acquisition of Alliance.

Speaking to AirInsight in October in Amsterdam, Qantas CEO Alan Joyce said he was optimistic about a positive ruling from the ACCC, especially after Rex lifted its objections. In October, Joyce was unwilling to discuss a Plan B but raised the options: “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.” It remains to be seen if Qantas will go to court if the outcome of its discussions with the ACCC is negative.

author avatar
Richard Schuurman
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016. Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.

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