Rex Supports Qantas Bid To Take Over Alliance

Qantas’ quest to acquire FIFO specialist Alliance received unexpected support when Rex said it would support the deal.

The local provider of the E190, Alliance, has claimed that any purchase must come with guarantees that the pair’s simulators will be accessible for use by rivals.

Qantas and Alliance have agreed to a deal, but the agreement is contingent on receiving approval from the Australian Competition and Consumer Commission (ACCC), which has expressed reservations about the takeover.

Significantly, Rex’s support comes months after it agreed to purchase rival FIFO operator Cobham, putting it back in direct competition with the national airline.

Rex minimised the ACCC’s concerns in his response to the agency about the planned merger.

Rex dismissed as “ludicrous” the idea that Qantas would have to discontinue “wet leasing” aircraft to competitors as a result of the new FIFO operation.

This is because “wet leasing” is “simply the delivery of aircraft, crew, and engineering services,” all of which fall squarely within the purview of the big carriers.

And if the numbers work out, Cobham is ready to roll up its sleeves and go to work.

Also, Rex found it “puzzling” that the ACCC would assume a merger would lead to higher ticket prices for consumers.

Given that the current market competitors (including VARA) have the capacity to fight vigorously for each new contract, “Rex does not believe that the Qantas purchase of Alliance will result in a major loss of competition.”

Qantas’s support for the new company depends on its ability to use its E190 and Dash 8-400 simulators and Alliance’s willingness to allow competitors to purchase E190 spare parts.

In August, Qantas announced that it did not anticipate any adverse effects from its takeover on the “very competitive charter business.” Under the terms of the new arrangement, it will increase its present 19.9 percent interest in the airline to 100%.

“As the ACCC has previously acknowledged, customers in the resources flying segment are sophisticated and well-resourced companies with procurement experts who have strong bargaining power in their negotiations with airlines and other operators,” argued John Gissing, the business group executive of associated airlines.

New airline service tenders may expect fierce competition from a resources industry that shows no signs of slowing down. Combining forces with Alliance makes good business sense and will benefit customers of both companies and the flying public.

Qantas “cannot be trusted” to compete fairly with rivals, the TWU warned earlier last week, prompting Rex to deliver his answer to the ACCC.

The union’s national secretary, Michael Kaine, claimed the decision would allow Qantas to construct an aircraft fleet that “cannot be matched by other airlines” and gain market share at the cost of Virgin.