Qantas, Rex put regional FIFO and charter flights on radar

Qantas has evoked the ire of its main rival Virgin and raised eyebrows at the Australian Competition and Consumer Commission announcing it will lift its 20 per cent stake in Queensland-based regional mining sector charter carrier Alliance Aviation to a full takeover bid, worth more than $600 million.

At the same time speculation has put Adelaide-based charter, freight and fly-in-fly-out specialist Cobham Aviation Services in the sights of plucky country-based Regional Express.

The Qantas move on Alliance would complement the national carrier's own FIFO work on the east and west coasts and some of its regional QantasLink services, where both carriers operate Fokker turboprop aircraft on charter and regular passenger routes.

Alliance also reportedly operates about 18 Embraer jets for QantasLink and flying service contracts with Virgin Australia.

The Virgin connections would be terminated if Alliance shareholders and the ACCC approve the deal.

The ACCC only recently completed a three year investigation of the potential conflict of interest in Qantas's existing ties with Alliance, instigated after the initial 20pc investment in 2019 stirred concerns about shrinking competition in the FIFO market.

The competition watchdog has confirmed it will now start to closely review the proposed full takeover.

Qantas managing director, Alan Joyce, argued the highly competitive charter segment could be serviced far more effectively by both airlines if they shared their Fokker fleets and resources, subsequently keeping planes operating for longer than either carrier may achieve by themselves.

He said it made sense to combine with Alliance to improve the availability of services and keep costs down for charter customers.

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However, Virgin responded saying Qantas already had a dominant stake in the charter market and absorbing Alliance's 70 aircraft and crews had serious implications for regional aviation markets and the consumers who would be caught out by reduced competition.

Mount Isa-based state Member for Traeger, Robbie Katter, agreed saying the buy-up was "undeniably anti-competitive as it would likely guillotine all arrangements Alliance now had with Virgin and wipe out any competition posed by Alliance to Qantas, or other market players.

He said Qantas Group, whose holdings include Jetstar, already held 62pc of the domestic aviation market and the buy out would "help the juggernaut trend further towards its target of 70pc".

Meanwhile, Cobham's Australian operations, established in 1990 to provide jet FIFO services to oil and gas producer Santos's Moomba site, have been effectively on the market for the past three months.

The original Australian business, part of the big UK-based Cobham Aviation business since 2000, has been owned by US private equity group Advent International for the past two years.

It flies about 20 aircraft working VIP charter services and FIFO routes, particularly in Western Australia and South Australia.

It also support's Qantas Freight's domestic operation, moving overnight freight on more than 2500 flights a year.

Another division is contracted to the federal government for aerial border surveillance and search-and-rescue operations spanning Australia's economic zone.

Although no official confirmation has come from Regional Express, Rex is understood to be running a due diligence investigation on the charter and FIFO business.

The Cobham business's sale future is expected to be decided in the next two months.

Country-based Rex has already made clear its plans to expand its newly established metropolitan jet passenger services further, helped by a $150 m war chest raised from Singaporean private equity investor PAG.

Late last month it signalled it was teaming up with US-based Delta Air Lines to share each others international passengers and booking arrangements in Australia.