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The ACCC on Friday delivered yet another twist in the industry battle to secure FIFO services after it denied a request for Virgin and Alliance to continue to collaborate.
The ruling means the two airlines can no longer jointly tender for mining companies’ contracts and must quickly unwind their current deal.
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It comes weeks after the competition watchdog also opposed Qantas’ bid to purchase all of Alliance, a move that in itself would have likely destroyed its deal with Virgin.
On Friday, the ACCC argued Virgin and Alliance had not demonstrated that there was “sufficient public benefit” to outweigh the detriment of their working together.
ACCC chair Gina Cass-Gottlieb said, “We’re concerned that continuing the charter alliance is likely to reduce the number of bidders in tender processes for charter services, particularly when there would only be one other large provider of these services, and so the potential incentives to reduce service levels or raise prices for FIFO charter services would remain.”
It added the deal, which it first approved in 2017, had not delivered on the benefits that it predicted at the time.
“The ACCC considered submissions from the applicants and other interested parties,” the organisation ruled. “From these submissions, the ACCC understands that, while there is some support for the alliance, a number of customers do not place significant value on having a combined charter and Regular Public Transport service offering from Virgin and Alliance and would prefer the airlines submit stand-alone bids in response to their tenders.”
The news follows the competition watchdog not granting conditional authorisation back in October. However, the fresh decision has also rejected a “transitional period” to enable them to unwind their current agreement and insisted it comes to an end in a “short period of time”.
It significantly comes weeks after the ACCC similarly stopped Qantas proposed takeover of Alliance.
“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,” said ACCC Chair Gina Cass-Gottlieb.
“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.”
Cass-Gottlieb said although it does not sell seats on major passenger routes, Alliance – which operates 70 aircraft with more on order – is still “one of Australia’s most significant airlines” and said it is unlikely that a new or existing airline could expand quickly enough to address the loss of competition from the deal.
“For many customers, Alliance is the preferred supplier due to its large fleet capacity, customer-centric approach and high-quality service offerings, including having the highest on-time-performance in the industry and demonstrated flexibility and willingness to meet customer needs.”
“Combining such an important player with Australia’s largest airline, Qantas, would be likely to substantially lessen competition and is something we oppose.”
It follows a breathless period for the sector, which has also seen Rex purchase FIFO operator Cobham.
