Qantas Airways’ proposed acquisition of Alliance Aviation Services Ltd has raised concerns with Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC). While Qantas reaffirms its view that the acquisition won’t diminish competition, the ACCC has outlined preliminary concerns regarding its potential impact on air transport services to regional and remote areas in Queensland and Western Australia, particularly for corporate customers.
ACCC Chair Gina Cass-Gottlieb expressed concerns about the merger, stating that it could substantially reduce competition for air transport services. The key points of concern include:
- Combination of Major Operators: The merger would unite two of the top three operators of air transport services in Queensland and Western Australia, potentially leading to a dominant market position in these regions.
- Impact on Regional Services: Industry participants have voiced concerns about how this acquisition could affect air transport services, particularly to regional and remote areas. The ACCC is assessing the competitive landscape, including the role of airlines such as Virgin and Cobham’s regional services arm (now owned by Rex).
- Effect on Leasing Services: The removal of Alliance’s aircraft leasing services raises concerns about the ability of current and new entrants to compete against Qantas on regional routes. Alliance plays a significant role as a supplier of wet-leased medium-sized aircraft to other airlines.
- Barriers to Entry: The ACCC highlights existing barriers for airlines seeking to enter or expand operations in regional and remote areas, including access to pilots, airport facilities, infrastructure, and regulatory approvals. The removal of Alliance as a supplier of wet leases could potentially increase these barriers.
Qantas currently holds just under 20% of Alliance and is its largest customer, leasing numerous aircraft that Alliance operates on Qantas’ behalf. The airline sees the acquisition of Alliance as a strategic move to better serve the growing resources sector. Qantas argues that Alliance represents only around 2% of the total Australian aviation industry and supplies approximately 30% of charter services, with Qantas, Virgin Australia, and other operators sharing the remaining market.
Qantas also points out that since announcing its intention to acquire Alliance, both Rex and Virgin Australia have made moves in the charter and resources sectors. Rex acquired charter operator National Jet Express from Cobham Aviation, and Virgin Australia disclosed plans to expand its resources flying with new 737-700 aircraft.
The Way Forward:
Qantas remains committed to working with the ACCC to address competition concerns. John Gissing, Qantas group executive of Associated Airlines and Services, highlighted Australia’s pro-competitive aviation industry and the strong bargaining power of sophisticated resource sector companies.
The ACCC has invited submissions from interested parties, and its final decision is expected on November 17, 2022.
The proposed acquisition of Alliance Aviation Services Ltd by Qantas Airways is currently under scrutiny by the ACCC, which has raised preliminary concerns about potential competition issues. As the ACCC continues its assessment, the aviation industry and stakeholders await the final decision, which will shape the competitive landscape of air transport services in regional and remote areas of Queensland and Western Australia.