ACCC threatens possible action against Qantas over Alliance deal

written by Adam Thorn | June 1, 2020
Bundaberg Airport
Qantas and Alliance both provide services to Bundaberg Airport (Bundaberg Airport)

The ACCC has warned Qantas it’s still considering “enforcement action” against the business if it finds evidence that its 2019 acquisition of Alliance Aviation shares broke competition rules.

On Monday morning, the organisation surprisingly released a strongly-worded update in which it said it had been “closely scrutinising” the purchase, and was focusing on the “competitive dynamics” between the two airlines.

In February 2019, the flag carrier bought a 19.9 per cent stake in Alliance, but the competition watchdog accused the flag carrier of not first approaching it for permission. The deal was potentially problematic because Alliance and Qantas are the only two operators for regular passenger flights between Brisbane and Bundaberg and Gladstone.

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Qantas told Australian Aviation in response that it rejected the notion the acquisition had any impact on competition and said its shareholding was “entirely passive”.

The Australian Competition and Consumer Commission update was, it said, in response to “queries by various stakeholders” but comes 16 months after the original deal.

Upon its completion, the organisation issued a “statement of issues”, which set out its concerns at the purchase, which made Qantas the single-biggest shareholder.

Later, news emerged that the airline was considering acquiring a larger stake.

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Last month, Australian Aviation reported that Alliance was set to increase profits this financial year by $7 million, despite the coronavirus pandemic. It claimed its ability to adapt planes for COVID-19 was a key factor.

The business said its “pioneering” measures, including social distancing seating plans, new cleaning regimes and passenger temperature checks, have been adopted by much of Australia’s industry.

Qantas said in a statement, “Qantas continues to fully co-operate with the ACCC’s investigation into its minority shareholding in Alliance Aviation, which has now been running for 16 months.

“The shareholding is entirely passive. Qantas has not sought board representation and has had no influence on the management of Alliance Aviation.

“Since Qantas became a shareholder, Alliance has continued to expand in competition with Qantas and others in the charter market. In announcing its record half-year results in February, Alliance said it continues to be ‘the preferred airline for the Australian mining and resources sector’.

“The shareholding has given Qantas more exposure to earnings from the resources sector, which is one of the few bright spots in the current domestic market and is primed for further growth.”

Alliance Aviation, the parent company of Alliance Airlines, describes itself as Australia’s leading air charter service operator, providing specialised services for the resources industry, as well as inbound and domestic group travel.

It currently has a fleet of 40 Fokker aircraft, employs 500 staff and provides regular and ad hoc charter services in Australia and New Zealand.

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7 Comments

  • CJ

    says:

    WOW

    That ACCC are fast.

    Only 16 months to respond to something very obvious to everyone.

  • Sam

    says:

    Interesting to see if Alliance had any impact on Qantas recently announcing QantasLink stopping the long running contract with mining competitor Cobham Aviation Services. Which was a major part of Cobham (formally National Jet) Aviation Services Operations’s in Australia. Qantas have regained the 25 maintained, predominantly B-717’s aircraft from Cobham in an end to a long and successful partnership. Qantas stated Last week in the Australian Financial Review, that is is the use the aircraft for more domestic routes due to the reduced market demand.
    Cobham and Alliance are major charter services in the mining and resources industry. They have been direct competitors for contracts all over the country since Alliance began services in 2008.
    Cobham continue to work with defence contracts and mining contracts nation wide here in Australia. Cobham Aviation Services, despite their loss of QantasLink, remain a diverse leader in aviation services worldwide.

  • weightandblanace

    says:

    Alliance also operated Virgin flights to regional QLD on behalf of VA.

  • Neil

    says:

    I thought Alliance were running Reginal and FIFO flights in Queensland on behalf of Virgin! Gee how big do Qantas really want to be.
    So much for competition, considering Qantas has just taken their Boeing 717s of Cobham, from their FIFO and reginal routes.

    • James

      says:

      Qantas always had the 717’s.

      All Qantas have done is take the crew off Cobham.

      ZERO change to the airline.

  • Bob

    says:

    You go Alliance,
    Just shows what good management and amazing business model can do even in this climate.
    Alliance should be underwritten or invested in to expand its fleet type and service regional Australia. Even if VA2 develops, aviation in Australia needs strong airlines like Alliance.
    Qantas’s monopoly help no one.

  • Andrea Shearer

    says:

    Is there no one with intestinal fortitude to pull Qantas CEO in fo a “Chat”. Perhaps the ACCC might shine a light in the eyes of the Qantas chairman, as a gentle reminder that Mr Joyce is up to his tricks again

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