QAN at the time they acquired their 19.9% shareholding in AQZ...

QAN at the time they acquired their 19.9% shareholding in AQZ signalled that they wanted to move to a majority shareholding, but clearly the ACCC’s position is that they would not clear this. Apart from some occasional wet lease flying, I don’t think AQZ provided much capacity to QAN back then.

The decision by QAN to commence using AQZ is interesting given that QAN’s other regional aircraft are all operated by wholly owned subsidiaries (Eastern Australia Airlines, Sunstate Airlines, National Jet Systems, Network Aviation). Why not use one of the existing subsidiaries to expand their regional flying? Does AQZ have a lower cost structure than the QAN subsidiaries? Is the AQZ flying only a stop gap measure for QAN (the announcements have all referenced a three year deal)? Could it be that QAN are seeking to flex their commercial muscle as AQZ’s largest customer to restrict AQZ from undertaking new activities that are detrimental to QAN’s interests?

The ACCC release this week on market share indicates Virgin’s recovery is underway. How important are regional flights to their financial viability? Presumably they have to recommence serving some regional markets sooner or later. Clearly they have been negotiating with AQZ but I would suggest that there has been an inability to agree terms. AQZ’s successful business model of not taking too much market or cost risk could be a stumbling block, with Virgin seeking to share (or pass on) these risks to AQZ. If so, good on AQZ for not buckling.

The REX situation will presumably play out in the next six months. Will they be forced to abandon chasing main truck business passengers and focus on the leisure market? Will they stop all B737 flying? Hopefully they don’t fail completely as this will cause major disruption to the regional markets they have flown their Saab 340’s to for years.