‘Ball’s in their court’: ACCC makes Qantas wait after blocking Alliance acquisition

Alliance is an aviation services company based in cities including Brisbane, Townsville, Cairns and Perth, specialising in the provision of private charter flight services to corporate customers, and leasing aircraft and associated services to other airline customers. It represents about 2 per cent of the total aviation industry and supplies 30 per cent of charter services, with the remainder split between Qantas (which owns about 23 per cent), Virgin (which owns 22 per cent) and a number of smaller operators.

The ACCC does not believe competitive carriers Virgin or Rex-owned National Jet Express (formerly known as Cobham) have the same fleet capacity, Qantas or Alliance’s reputation in providing charter services, or the ability to scale quickly enough to fill any void left by Alliance’s absence. Airlines hoping to expand at scale would face barriers including training of air crew and engineers, suitable aircraft and infrastructure, regulatory requirements, and establishing a reputation for reliable service.

“Alliance doesn’t sell seats on major passenger routes, so many Australians may not have heard of them, but it is one of Australia’s most significant airlines, with 70 aircraft currently and more on order,” Cass-Gottlieb said.

“Combining such an important player with Australia’s largest airline, Qantas, would be likely to substantially lessen competition and is something we oppose.”

The competition watchdog’s decision, which was delayed four times, comes nearly 12 months after Qantas and Alliance publicly announced intentions to merge. Qantas has owned a 19.9 per cent stake in Alliance since 2019, a move that ACCC did not take enforcement action against. Qantas announced on May 5 the intention to acquire the remaining shares in Alliance.

Last August, the ACCC flagged preliminary concerns with Qantas’ proposed acquisition following submissions from groups including rival airline Regional Express and the Transport Workers Union.

Qantas is not the only airline that has been angling to expand its charter service offering: last July, Rex acquired charter operator National Jet Express from Cobham Aviation, receiving ACCC clearance 11 days later.

Cass-Gottlieb said Rex, a $150.6 million regional airline, was much smaller compared with Qantas, valued at nearly $12 billion. “We do not see [Rex or National Jet] growing at the pace to replace the competitive constraint of Alliance in the near future,” she said.

In a statement on Thursday, Qantas said the ACCC’s decision to block the acquisition was“at odds with the increasingly competitive nature of the segment and views expressed by a competitor that the acquisition would not lessen competition”.

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“As the ACCC has previously acknowledged, customers in the resources segment are sophisticated and well-resourced with procurement expertise and strong bargaining power in their negotiations with airlines and other operators. The proposed acquisition would enable Qantas to service this important sector better, particularly through the efficiencies unlocked through a combined fleet of similar aircraft,” the company said.

Alliance managing director Scott McMillan said he was disappointed by the ACCC’s decision and believed there was “strong industrial logic” for the acquisition.

“We remain of the view that … the proposal does not substantially lessen competition,” McMillan said. “We also think there is a compelling case that the proposed transaction will lead to superior outcomes both for Alliance shareholders and for our customers.”