Australian airline Qantas has a prominent share of the Australian aviation market, however their latest corporate acquisition may not be quite up to standard. The ACCC has today raised concerns that this acquisition will substantially lessen competition in the Australian airline industry. The ACCC has released a statement of issues, calling for interested stakeholders to share their views on the acquisition.
A narrowing industry
Airline mergers are not uncommon. On the contrary, acquisitions of smaller airlines by larger ones is very frequent. A well known international example is the merger of Air France and KLM Royal Dutch Airlines, which merged in 2004. Closer to home, Jetstar Airways is a subsidiary of Qantas. Qantas, as Australia’s largest airline has a large footprint in the aviation landscape, and appear set on further expanding this. This is symptomatic of a larger trend in the industry, which has seen a wave of mergers in recent times. Whilst airlines have said that this is necessary for their survival, consumers are concerned this will impact on competitive pricing and their rights overall.
Qantas makes a move on Alliance
In February 2019, Qantas purchased an almost 20% stake in Alliance. Qantas also voiced plans to increase that stake to the extent that they would be the majority shareholder in Alliance. Alliance airlines, albeit smaller than Qantas, also competes with Qantas on some regional routes. Yet despite the two airlines competing in this area, this wasn’t cleared with the ACCC. Further, section 88 of the Competition and Consumer Act 2010 (Cth) states that mergers between competing corporations can occur where the ACCC gives authorisation.
Legal issues
Mergers between companies which compete with each other are generally prohibited in Australia. Section 50 of the Competition and Consumer Act 2010 (Cth) prohibits corporations from acquiring a company if it would “substantially lessen competition.” This rule is applicable to all industries, including media, banking and transport. Last year, the ACCC announced that it would not oppose a merger between media companies Channel 9 and Fairfax. Although this merger effectively combined Australia’s largest print media company with one of Australia largest television networks, the ACCC did not prohibit the merger. This was because print and television media are separate enough that Fairfax and Channel 9’s merger would not substantially lessen competitive in the media industry.
Final thoughts
The case of Qantas is different. Although Alliance operates out of Brisbane, Queensland and flies to regional airports, Qantas also operates flights on the same path. If Qantas acquires Alliance, then there will be no price comparison for these routes – and no competition.
