Ann: Alliance increases and extends E190 deal with QANTAS, page-9

The ACCC concerns on the QAN proposed acquisition of AQZ were a lessening in competition in three areas:

1. The provision FIFO charters, particularly in WA;
2. Removing AQZ as a supplier of wet-leasing capacity to other operators (QAN has indicated that if they acquire AQZ that once existing contractual arrangements end they will cease making AQZ aircraft available to VA and other operators);
3. RPT services between BNE and Moranbah (where QAN and AQZ are the only operators).

See https://www.accc.gov.au/system/files/public-registers/documents/Qantas%20Alliance%20%20-%20Statement%20of%20Issues%20-%2018%20August%202022.pdf

So the question is what does Thursday’s announcement change on these issues. Certainly the is less scope for AQZ to provide E190 and F100 capacity to VA because if the options over the remaining E190’s are exercised then AQZ will have no capacity to continue the existing wet lease F100 flying for VA and the the E190’s dry leased to AirNorth will be needed back in the AQZ flying fleet. Short of AQZ doing a capital raise to acquire more aircraft, they are now out of the wet lease market except as a supplier to QAN. So arguably, the acquisition of AQZ won’t change competition since AQZ is effectively withdrawing from the market. With the upcoming float of VA, arguably they will have greater access to capital to expand their own fleet and therefore be less reliant on AQZ.?

AQZ also would appear to have limited capacity to actively chase additional FIFO work in WA (given its fleet will be fully engaged and its balance sheet is stretched) so competitor activity will mainly be relevant for the renewal of existing AQZ contracts. Other operators a chasing additional aircraft for WA flying but AQZ appears to be backing off.

BNE to Moranbah surely is only a small piece of the puzzle. The RPT services that AQZ fly are off the back of contract FIFO work, so if another operator picked up the contracts currently flown by AQZ then surely they could offer RPT services on the route.

The lack of any detail from AQZ last Thursday suggests either the deal only was agreed at the last minute and AQZ hasn’t yet worked through the wider ramifications or (and more likely) they are not wanting to put too much information into the public domain ahead of the ACCC ruling which is tentatively scheduled for three weeks time. If the ACCC turn QAN down, AQZ needs to communicate to shareholders on its future strategy, capital structure, and financial projections as an independent company.