The Australian Competition and Consumer Commission (ACCC) is continuing to investigate the acquisition by Qantas of a 19.9 per cent stake in Alliance Airlines.
Qantas acquired a 19.9 per cent interest in Alliance last year, becoming Alliance’s single biggest shareholder.
On 1 August 2019, the ACCC issued a statement of issues, which set out the ACCC’s competition concerns with the minority stake.
The ACCC issued a statement today in response to queries by various stakeholders.
“The Australian aviation industry is in a state of major upheaval and now, more than ever, we are concerned that competition by smaller airlines is not hindered,” the statement said.
“We will continue to seek information from market participants to gauge any impacts on competition arising from Qantas’s stake in Alliance.”
ACCC chair Rod Sims said Alliance is an important and close competitor to Qantas, particularly in regional markets and for fly-in fly-out services for mining customers.
Alliance, through a codeshare arrangement with Virgin, is also Qantas’ only competitor on passenger routes between Brisbane and the important regional centres of Bundaberg and Gladstone.
“Qantas’ decision to complete the acquisition of the 19.9 per cent stake in Alliance without first seeking ACCC clearance means this is an enforcement investigation rather than a standard merger review,” Mr Sims said.
“The Australian aviation industry remains highly concentrated and it is crucial that competition provided by smaller airlines is maintained long-term.
“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.”
The ACCC’s investigation is focussed on the competitive dynamics between Qantas and Alliance, examining whether Qantas’s 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,” Mr 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.
Qantas ‘completely transparent'
In August, Qantas said in a statement the company had not sought any management control or a board seat and remained a “passive investor” in Alliance.
“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,” the statement said.
“To the contrary, Alliance Aviation has extended the services it offers to the market in recent months. Qantas has no plans to decrease its holding in Alliance.
“We respect the role of the ACCC and have agreed not to expand our shareholding in Alliance while the ACCC continues its investigation. We continue to cooperate fully with the ACCC’s inquiries.
“Qantas has been completely transparent in its goal to ultimately seek ACCC permission to take a majority stake in Alliance, but acknowledges the regulatory challenges this poses.
“Our current stake is not contingent on reaching a majority position.”