The Qantas-Alliance Airlines Merger Raises Concerns

The Australian Competition and Consumer Commission (ACCC) released a statement of issues outlining preliminary competition concerns with Qantas Airways’ proposed acquisition of Alliance Aviation Services.

Qantas and Alliance fly business customers to regional and remote areas of Australia. Mining and resource businesses in Queensland and Western Australia rely heavily on aircraft to provide “fly-in, fly-out” services for their employees.

“We are concerned that this proposed acquisition will substantially lessen competition for air transport services to and from regional and remote areas in Queensland and Western Australia for corporate customers,” ACCC Chair Gina Cass-Gottlieb.

“This merger would combine two of the top three operators of air transport services in Queensland and Western Australia,” said Ms Cass-Gottlieb.

“Industry participants have expressed strong concerns about the impact of this proposed acquisition on air transport services, particularly to regional and remote areas,”

In light of the proposed merger, Alliance would no longer be able to compete with Qantas on the regional passenger transport route between Brisbane and Moranbah.

Competition from airlines like Virgin and the regional services part of Cobham, recently acquired by Rex, is being considered by the Australian Competition and Consumer Commission.

The ACCC is also thinking about how current and new entrants might fare against Qantas in regional flights if Alliance stops providing aircraft leasing services.

Concerning wet-leasing medium-sized aircraft, Alliance is a major provider for other airlines. A wet lease is a contract between two parties in which one airline rents an aircraft and the services of another airline or business to operate the rented aircraft. Airlines frequently turn to wet leases when adding new routes or temporarily increasing capacity.

“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 the price of wet-leases for Qantas’ competitors is likely to increase these barriers significantly,” Ms 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.”