Qantas bought the 19.9 per cent stake early in 2019, becoming Alliance’s single biggest shareholder and said it intended to seek regulatory approval to build on its shareholding, with a longer-term view of taking a majority position in Alliance.

The ACCC said it is continuing to investigate Qantas’s stake and whether it was exerting influence over the company’s decision making.

ACCC chairman Rod Sims said the organisation’s current view was that any further increase in Qantas’s stake in Alliance was very likely to raise significant competition concerns under the Competition and Consumer Act.

It said today the Australian aviation industry was in a state of major upheaval and it was concerned that competition by smaller airlines was not hindered.

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

“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’s only competitor on passenger routes between Brisbane and the important regional centres of Bundaberg and Gladstone,” Sims said.

“Qantas’s 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.

“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,” Sims said.

Qantas said it was fully cooperating with the ACCC’s investigation into its minority shareholding in Alliance Aviation, which has now been running for 16 months and rejected the suggestion that its 19.9 per cent share had any impact on competition.

It said the shareholding is entirely passive and Qantas had not sought board representation and has had no influence on the management of Alliance Aviation.
Since Qantas became a shareholder, Alliance had 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 continued to be “the preferred airline for the Australian mining and resources sector.
“The shareholding has given Qantas more exposure to earnings from the resources sector, which is one of the few bright spots in the current domestic market and is primed for further growth,” Qantas said.