Australian regulator raises competition concerns over Qantas takeover of charter operator

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An airplane-looking crew member cleans a plane as Qantas begins preparing and outfitting planes for the return of international flights, ahead of Australia’s relaxation of border regulations on the coronavirus disease (COVID-19), at Sydney Airport in Sydney, Australia, October 21, 2021. REUTERS/Loren Elliott

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SYDNEY, Aug 18 (Reuters) – Australia’s competition regulator said on Thursday that Qantas Airways Ltd’s (QAN.AX) proposed purchase of the remainder of charter operator Alliance Aviation Services Ltd (AQZ.AX) for 610.8 million Australian dollars (423.41 million dollars) raised concerns. .

“We are concerned that this proposed acquisition will significantly reduce competition for air transport services to and from regional and remote areas of Queensland and Western Australia for corporate customers,” said the president of Australian Competition and Consumer Commission (ACCC), Gina Cass-Gottlieb. A declaration.

Alliance shares fell 6.5% in early trading on his comments.

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A final decision is expected in November, the ACCC said.

Qantas has owned 20% of Alliance since 2019, but buying the remaining 80% would give it a dominant share of flights for resource industry customers, a market in which it competes with Virgin Australia and National Jet Express. of Cobham, soon to be owned by Regional Express Holdings Ltd (REX.AX). Read more

Many mining, oil and gas companies in Australia staff their operations using a fly-in/fly-out (FIFO) model rather than permanently basing their employees at remote sites, making flying a lucrative business for the airlines.

Qantas has offered Alliance investors A$4.75 per share for the rest of the company in an all-share deal. Read more

Alliance shares had closed at A$3.55 on Wednesday, indicating investor skepticism that the deal would be approved by the regulator.

Qantas Group Director of Associated Airlines and Services John Gissing said on Thursday the airline would continue to work with the regulator to ensure any competition concerns were resolved.

Alliance accounts for only around 2% of total aviation industry capacity but provides around 30% of charter services, followed by Qantas with 23% and Virgin with 22%, Qantas said in a statement.

A Virgin Australia spokesman said the proposed acquisition by Qantas had serious implications for competition in Australian aviation and consumers would be hurt if competition was reduced.

Virgin and Alliance have entered into an agreement allowing them to jointly bid for FIFO activities since 2017. The ACCC initially proposed to deny this agreement on competitive grounds, but approved it in a final decision after comments from industry players. market.

Alliance also operates 14 jets on regional routes on behalf of Qantas and four for Virgin.

($1 = 1.4426 Australian dollars)

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Editing by Muralikumar Anantharaman and Jacqueline Wong

Our standards: The Thomson Reuters Trust Principles.

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