Qantas has no plans to sell Alliance stake despite competition concerns

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August 01, 2019
Qantas ACCC Alliance
Photo: Alliance

Qantas says it has no plans to sell its 19.9 percent stake in Brisbane-based Alliance Airlines despite concerns from the Australian competition regulator about the impact of the deal on the aviation market.

The Australian Competition and Consumer Commission on Thursday released a statement of issues outlining its preliminary concerns about the acquisition and is seeking public comment.

The deal has attracted the ACCC’s attention because Alliance competes with Qantas to supply charter services to companies in Queensland, the Northern Territory and Western Australia and is a significant player in the fly-in, fly-out resources sectors.

READ: Airfare rises to hit some countries harder than others.

It also the only competitor to Qantas on regular public transport routes between Brisbane and the Queensland regional centers of  Bundaberg and Gladstone.

The competition regulator indicated it could take court action to force Qantas to divest the shares if it found the acquisition was anti-competitive.

“Alliance Airlines is a close, important and growing competitor to Qantas, including through its partnership with Virgin,’’ ACCC chairman Rod Sims said.

“ It provides consumers and companies with a crucial alternative to Qantas in markets that are already highly concentrated.

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

“We consider this shareholding has the potential to impact Alliance’s future growth and its ability to be a strong competitor.

“ It may impact Alliance’s ability to grow through raising funds from investors, or to consider rival takeover approaches. It may also impact whether Alliance’s customers perceive it to be an independent rival to Qantas.”

“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.”

Qantas expressed a desire to take a majority position in Alliance when it bought its 19.9 percent stake in February but has since provided the ACCC with an undertaking it will buy no more shares at this stage.

However, it said Thursday it had no plans to decrease its share in Alliance.

Australia’s dominant airline noted the ACCC’s expression of concern and said it had invested in the alliance because it was “a profitable, well-managed business with attractive levels of exposure to a resurgent resources charter market”.

“As we made clear when announcing our stake, we have not sought any management control or a board seat and remain a passive investor in Alliance,’’ it said.

“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.

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

The airline said it would continue to cooperate with the ACC and that it had been completely transparent in its goal to ultimately seek permission from the ACCC to take a majority stake in Alliance.

It acknowledged the regulatory challenge this posed but said its current stake was not contingent on reaching a majority position.