Qantas will seek more information from the Australian Competition and Consumer Commission (ACCC) about its decision to oppose the planned acquisition of Alliance Aviation Services Ltd (Alliance).

The airline said it remains confident the acquisition would not substantially lessen competition in any market.

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Qantas said that as well as reviewing the announcement released today, it has requested a meeting with the ACCC to understand its decision, which it says is at odds with the increasingly competitive nature of the segment and views expressed by a competitor that the acquisition would not lessen competition.

Qantas argues that since it had reached an agreement to fully acquire Alliance in May 2022, competitor Rex has acquired charter operator National Jet Express from Cobham Aviation, a transaction that received ACCC clearance within 11 days, and Virgin Australia has been clear about its plans to expand its own resources flying. Several other airlines and aviation businesses also offer charter services.

The airline said that 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.

Qantas said that the proposed acquisition of Alliance would enable Qantas to service this important sector better, particularly through the efficiencies unlocked through a combined fleet of similar aircraft.

Qantas said that it first flagged its long-term interest in ultimately acquiring 100 per cent of Alliance when it bought just under 20 per cent of the charter operator in February 2019. The ACCC investigated that minority holding for three years and made no findings that it lessened competition.

Qantas is also Alliance’s biggest customer, wet leasing 18 Embraer aircraft that are operated on the national carrier’s behalf on a number of routes. Qantas in February announced options for up to 12 additional E190 aircraft to be wet-leased from Alliance to provide increased capacity and network connectivity in the domestic market.

The ACCC said that Qantas and Alliance are key suppliers of air transport services to mining and resource companies who need to transport ‘fly-in fly-out’ workers in Western Australia and Queensland. After a thorough investigation of the proposed acquisition, the ACCC has concluded that the transaction is likely to substantially lessen competition in markets for the supply of air transport services to resource industry customers in Western Australia and Queensland.

“We consider Alliance to be an important competitor to Qantas, and the removal of Alliance is likely to substantially lessen competition threatening increased prices and reduced service quality for customers,” ACCC Chair Gina Cass-Gottlieb said.

“Qantas and Alliance currently strongly compete with each other in markets where there are few effective alternatives. The proposed acquisition would combine two of the largest suppliers of charter services in Western Australia and Queensland.”

“Flying workers in the resource industry to and from their worksites is an essential service for this important part of the Australian economy, so it is critical that competition in this market is protected,” Ms Cass-Gottlieb said.

The ACCC also received considerable feedback that Alliance is strongly valued by customers as a particularly vigorous and effective competitor.

“For many customers, Alliance is the preferred supplier due to its large fleet capacity, customer-centric approach and high-quality service offerings, including having the highest on-time-performance in the industry and demonstrated flexibility and willingness to meet customer needs,” Ms Cass-Gottlieb said.

“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.”

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

The ACCC carefully considered the level of competition provided by other airlines such as Virgin Australia and National Jet Express (which was recently purchased by Rex), and other smaller market participants. 

The ACCC found that it is unlikely a new or existing airline could expand quickly to a scale that would address the loss of competition resulting from the proposed acquisition.

“Qantas will face limited competition if allowed to acquire Alliance because most other airlines lack the right aircraft, fleet size, or capabilities needed to compete effectively,” Ms Cass-Gottlieb said.

“Airlines wanting to enter or expand at scale, face a combination of barriers, including incumbency advantages, the need to establish a reputation for providing a reliable service, access to and training of air crew and engineers, access to suitable aircraft and infrastructure, and the significant regulatory requirements to fly.”

“This combination of factors makes it very difficult for smaller airlines to win significant customer contracts and grow their business,” Ms Cass-Gottlieb said.