News: AQZ UPDATE 1-Australia's Qantas says it will not trim Alliance stake despite competition...

(Recasts with Qantas response, adds quote, background)

Aug 1 (Reuters) - Australian flag carrier Qantas Airways Ltd (QAN) said it had no plan to cut its stake in Alliance Airlines, after the competition regulator raised concerns over its acquisition of 19.9% in its rival.

The regulator said Brisbane-based Alliance competed with Qantas in Queensland, Northern Territory and Western Australia states, and was Qantas’s only competitor on certain domestic passenger routes.

Australian Competition and Consumer Commission (ACCC) Chair Rod Sims said Alliance was a "close, important and growing competitor to Qantas", both directly and through citing its partnership with domestic rival Virgin Australia Holdings (VAH) .

"We consider this shareholding has the potential to impact Alliance's future growth and its ability to be a strong competitor," Sims said in a statement on Thursday.

Qantas had not sought informal merger clearance from the regulator for the deal, he added.

Qantas said it was a "passive investor" in Alliance and rejected the commission's concerns about competition.

"We do not believe there is any evidence of a lessening of competition as a result of our minority stake, nor any reasonable prospect that there will be," the airline said in a statement.

The ACCC said Qantas had indicated it would not acquire any further stake in Alliance until the antitrust regulator had completed its investigation into the original acquisition.

Qantas said in February it had acquired 19.9% of Alliance Airlines, a unit of Alliance Aviation Services Ltd (AQZ) , for A$60 million ($41.1 million).

($1 = 1.4601 Australian dollars)