Australian competition watchdog blocks Qantas' acquisition of Alliance Aviation

Australia's competition regulator said on Thursday it was opposing Qantas Airways Ltd's proposed A$610.8 million ($409.48 million) acquisition of Alliance Aviation Services Ltd as it would substantially reduce competition. Shares of Alliance fell 9.1% as the Australian Competition and Consumer Commission's (ACCC) much-delayed review threatens to derail the proposed transaction made nearly a year ago. Qantas shares were up 0.9%, as of 0007 GMT.


Qantas and Alliance are key players in providing air transport services to workers of mining and energy companies in Queensland and Western Australia, the so-called "fly-in fly-out" services. The Australian competition regulator said in its review that Alliance's integration with Qantas could substantially lessen competition in the charter services sector in the two states. "We consider Alliance to be an important competitor to Qantas, and the removal of Alliance is likely to substantially lessen competition, threatening increased prices and reduced service quality for customers," ACCC Chair Gina Cass-Gottlieb said.

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"Qantas and Alliance currently strongly compete with each other in markets where there are few effective alternatives. The proposed acquisition would combine two of the largest suppliers of charter services in Western Australia and Queensland." The decision curtails the ability of Qantas, Australia's biggest airline by market share, to service the resources sector, the engine of the domestic economy. The watchdog also considered the level of competition other airlines such as Virgin Australia and National Jet Express could provide and found it unlikely for any new or existing airlines to fill the gap the deal would create. 

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In an exchange filing, Qantas said it wanted more information and had requested a meeting to understand the regulator's decision, adding that it was confident the acquisition would not impact competition in any market. Separately, Alliance said there was a "strong industrial logic" for it to be a part of the Qantas group and that it would closely consider its options before deciding on future steps.

($1 = 1.4916 Australian dollars)

Source: Reuters

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