01/08/2019 - 13:39

ACCC outlines Qantas-Alliance concerns

01/08/2019 - 13:39

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Qantas has reaffirmed its desire to gain control of Alliance Aviation Services despite the competition watchdog today expressing concern about the two airlines coming together.

Qantas has reaffirmed its desire to gain control of Alliance Aviation Services despite the competition watchdog today expressing concern about the two airlines coming together.

“Alliance Airlines is a close, important and growing competitor to Qantas, including through its partnership with Virgin Australia,” Australian Competition and Consumer Competition chairman Rod Sims said.

“It provides consumers and companies with a crucial alternative to Qantas in markets that are already highly concentrated.”

The ACCC said Qantas did not seek informal merger clearance before it spent $60 million acquiring a 19.9 per cent stake in Alliance early this year.

This made Qantas Alliance’s biggest single shareholder, and the ACCC believes this has the potential to adversely impact Alliance’s future growth and its ability to compete.

“It may impact Alliance’s ability to grow through raising funds from investors, or to consider rival takeover approaches,” Mr Sims said.

“It may also impact whether Alliance’s customers perceive it to be an independent rival to Qantas.”

“In our view, any move by one company to acquire and build on a significant stake in a close competitor is likely to raise competition issues, due to the potential for the two businesses to compete less vigorously, or to influence each others’ strategies or outcomes.”

Alliance is a major provider of fly-in, fly-out charter air services for mining companies in Queensland, the Northern Territory and Western Australia.

Alliance is also Qantas’s only competitor on regular passenger transport routes between Brisbane and the regional centres of Bundaberg and Gladstone.

Qantas said today it did not agree with the ACCC’s assessment.

“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,” it said.

“To the contrary, Alliance Aviation has extended the services it offers to the market in recent months.”

Qantas added it has not sought any management control or a board seat and remain a passive investor in Alliance.

It plans to retain its current holding and still wants control.

“Qantas has been completely transparent in its goal to ultimately seek ACCC permission to take a majority stake in Alliance, but acknowledges the regulatory challenges this poses. Our current stake is not contingent on reaching a majority position,” Qantas said.

Today’s announcement comes after the international owners of another major FIFO competitor, Cobham Aviation Services, said the local business was under review.

It also coincided with the news that tickets have gone on sale for the first-ever scheduled air service between Melbourne and Kununurra, due to commence in May next year.

Alliance will operate the service, which will be sold through Virgin.

The direct flight, running three times per week, is the result of a partnership between Tourism WA, the Kimberley Development Commission, the Shire of Wyndham-East Kimberley, the East Kimberley Marketing Group, Alliance, Virgin and travel company APT.

The inaugural flight will be just before Kununurra’s 10-day Ord Valley Muster.

Tourism WA will showcase the flights as part of a $250,000 marketing campaign in the second half of this year to promote Australia’s North West region.

APT will use the flights as part of a new cruise package between Wyndham and Broome in 2020.

The service will be operated by Alliance’s Fokker 70 aircraft, which seats 8 passengers in Business Class and 65 in Economy Class.

East Kimberley Marketing Group chair Michael McConachy said its an exciting time for tourism in the Kimberley, with the direct flights opening up the region to the eastern states in a way which has never been possible before.

 

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