Plans are stalled! Australia’s competition watchdog has raised preliminary concern over Qantas’ investment plans in Alliance Airlines.

The ACCC today expressed preliminary concern, five months after Qantas acquired 19.9 percent interest in the air charter company.

Read on for the full story:

 

WHY IS THE ACCC SO CONCERNED?

karryon-alliance-airlines

In a statement, the competition watchdog said Alliance Airlines competes strongly with Qantas for charter air services in Queensland, the Northern Territory and Western Australia.

Additionally, Alliance Airlines is the Flying Kangaroo’s only competitor on regular passenger transport routes between Brisbane and Bundaberg and Gladstone.

The ACCC is worried that Qantas’ interest in Alliance Airlines may reduce competition “in markets that are already highly concentrated”.

Additionally, ACCC’s Chairman Rod Sims believes the stake purchase may impact Alliance Airlines future growth, whether customers perceive it as an independent rival to Qantas and affect rival takeover approaches.

“Qantas did not seek informal merger clearance from us before it acquired this stake in Alliance, which made Qantas Alliance’s biggest single shareholder.”

Rod Sims, ACCC Chairman

“In our view, any move by one company to acquire and build on a significant stake in a close competitor is likely to raise competition issues, due to the potential for the two businesses to compete less vigorously, or to influence each others’ strategies or outcomes,” he added.

 

HOW DID QANTAS RESPOND?

The Flying Kangaroo responded to the ACCC online, saying it invested in Alliance Airlines because “it is a profitable, well-managed business with attractive levels of exposure to the resurgent resources charter market”.

Qantas stressed that it was not “sought any management control or a Board seat” and continues to remain a passive investor.

“We do not believe there is any evidence of a lessening of competition as a result of our minority stake, nor any reasonable prospect that there will be.”

Qantas

“To the contrary, Alliance Aviation has extended the services it offers to the market in recent months.”

 

WHAT WILL HAPPEN NOW?

The ACCC will continue to investigate the potential lessening of competition due to the purchase. The watchdog has called for customers and competitors to submit comments on the issue.

Qantas has agreed to corporate fully with the watchdog’s inquiries, saying it has been “completely transparent in its goal to ultimately seek ACCC permission to take a majority stake in Alliance”.

The airline continued, saying its current stake is not “contingent on reaching a majority position” and has agreed to not acquire any further interest in the company until the investigation is over.