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1 June, 2020

ACCC continues to investigate Qantas over stake in regional competitor

By Travel Weekly

Australia’s competition watchdog is continuing to investigate Qantas’ acquisition of a stake in Alliance Airlines during what is a time of unprecedented uncertainty for airlines.

Qantas acquired a 19.9 per cent interest in Alliance in February last year, becoming the regional airline’s single biggest shareholder.

However, the Australian Competition & Consumer Commission (ACCC) raised its concerns with the deal in August 2019.

ACCC chair Rod Sims said that with Australia’s aviation industry currently in a state of major upheaval, he wants to ensure that competition by smaller airlines is not hindered.

“The Australian aviation industry remains highly concentrated and it is crucial that competition provided by smaller airlines is maintained long term,” he said.

“The ACCC has been closely scrutinising the effects of the acquisition of this shareholding by Qantas. Acquiring a strategic stake in a close competitor in such a concentrated market raises clear competition concerns.”

Alliance is a close competitor to Qantas, particularly in regional markets and for fly-in, fly-out services for mining customers.

Through a codeshare arrangement with Virgin Australia, Alliance is also Qantas’ only competitor on passenger routes between Brisbane and the regional centres of Bundaberg and Gladstone.

The ACCC’s investigation is focused on the competitive dynamics between Qantas and Alliance, examining whether Qantas’ stake affects Alliance’s ability to raise funds, consider takeovers or participate in commercial ventures, and whether Qantas is attempting to exert influence on Alliance’s decision-making or operations.

“We will consider enforcement action if there is evidence that the Qantas shareholding is compromising Alliance’s ability to be a strong competitor to Qantas, now and in the future,” Sims said.

Qantas has stated publicly that it intends to seek regulatory approval to build on its current shareholding, with a longer-term view of taking a majority position in Alliance.

“Our current view is that any further increase in Qantas’s stake in Alliance is very likely to raise significant competition concerns under the Competition and Consumer Act,” Sims said.

The ACCC said it would continue to seek information from market participants to gauge any impacts on competition arising from Qantas’ stake in Alliance.

In a statement to Travel Weekly, Qantas said it continues to fully cooperate with the ACCC’s investigation into its shareholding in Alliance, and has rejected the suggestion that its 19.9 per cent share has any impact on competition.

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

“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’.

Qantas said the shareholding has also provided it with more exposure to earnings from the resources sector, which it noted was “one of the few bright spots in the current domestic market and is primed for further growth”.

“Qantas acknowledges the importance of strong competition, which has benefited travellers and made airlines better,” it said.

“Australia has one of the most pro-competitive aviation sectors in the world, with fewer barriers to entry than most other countries.”

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accc airlines alliance Alliance Airlines Australian Competition Consumer Commission aviation competition watchdog qantas