The Australian Competition and Consumer Commission (ACCC) announced Thursday (18 August) that it has “preliminary competition concerns” with the proposed acquisition of Alliance Aviation Services by Qantas Airways.
In Australia, Qantas and Alliance provide air transport services to regional and remote areas for corporate customers. The airlines closely compete in the supply of these services to mining and resource companies who need to transport ‘fly-in fly-out’ workers in Queensland and Western Australia.
“We are concerned that this proposed acquisition is likely to substantially lessen competition for air transport services to and from regional and remote areas in Queensland and Western Australia for corporate customers,” said ACCC Chair Gina Cass-Gottlieb.“This merger would combine two of the top three operators of air transport services in Queensland and Western Australia. Industry participants have expressed strong concerns about the impact of this proposed acquisition on air transport services, particularly to regional and remote areas.”
The proposed acquisition would remove Alliance as the only competitor to Qantas on the Brisbane-Moranbah regional passenger transport route.The ACCC is considering the level of competition provided by airlines such as Virgin and Cobham’s regional services arm, which was recently purchased by Rex.
The ACCC is also considering how the removal of Alliance’s aircraft leasing services would impact the ability of current and new entrants to compete against Qantas on regional routes. Alliance is a key supplier of wet-leased medium-sized aircraft to other airlines. Wet-leases are arrangements where an airline leases a plane, crew, and other related services from another airline or business. Wet leases are often used by airlines to expand into new routes or to provide temporary capacity increases.
“Our preliminary view is that there are already significant barriers for airlines who want to enter or expand their operations in regional and remote areas, including access to pilots, airport facilities and infrastructure, and associated regulatory approvals. The removal of Alliance as a supplier of wet-leases or the increase in price of wet-leases for Qantas’ competitors is likely to significantly increase these barriers,” Cass-Gottlieb said. “A competitive and well-functioning aviation sector is fundamental to the Australian economy. We will closely scrutinise all mergers that may reduce competition in this sector.”
The ACCC said it invites submissions from interested parties in response to the statement of issues by 1 September 2022. The ACCC’s final decision is scheduled for 17 November 2022.