The competition watchdog says it will oppose Qantas' proposed acquisition of Alliance Airlines, an ASX-listed charter airline that mostly serves the resource sector.
The Australian Competition and Consumer Commission said on Thursday it was concerned that the $614 million transaction would reduce competition for resources industry customers in Western Australia and Queensland.
"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.
"Flying workers in the resource industry to and from their worksites is an essential service for this important part of the Australian economy, so it is critical that competition in this market is protected."
Qantas said it had requested a meeting with the ACCC to seek more information about its decision, which it said was at odds with the increasingly competitive nature of the segment.
"As the ACCC has previously acknowledged, customers in the resources segment are sophisticated and well resourced with procurement expertise and strong bargaining power in their negotiations with airlines and other operators," Qantas said.
The ACCC said it carefully investigated the proposed acquisition, which was first announced in May 2022, and had received "considerable feedback" that Alliance was strongly valued by customers as a particularly vigorous and effective competitor.
The ACCC said while Australians might not have heard of Alliance because it doesn't sell seats on most passenger routes, it was one of Australia's most significant airlines, with 70 aircraft currently and more on order.
Qantas currently wet-leases 18 Embraer aircraft from Alliance, which operates them for QantasLink.
The flag carrier took a nearly 20 per cent stake in Alliance in February 2019 and was proposing to acquire the rest of the company in an all-scrip transaction.
Alliance Aviation said in a statement that it was disappointed with the ACCC's decision and would consider its options before deciding on its next step.
The two companies could decide to go ahead with the merger despite the ACCC's opposition, meaning the matter would be decided by the Federal Court.
"While we respect the ACCC and its process, we remain of the view that there is a strong industrial logic for Alliance to be part of the Qantas Group and that the proposal does not substantially lessen competition," said managing director Scott McMillan.
"We also think there is a compelling case that the proposed transaction will lead to superior outcomes both for Alliance shareholders and for our customers."
