ACCC hints at Qantas quid pro quo

SYDNEY - Australia's competition watchdog says Qantas Airways' play for Impulse Airlines raises serious questions about long-term competition.

The Australian Competition and Consumer Commission added that Qantas rivals Ansett and Virgin Blue both had valid concerns.

Emphasising that deliberations were still at an early stage, the commission said any deal to allow Australia's biggest airline to take the discount carrier under its wing would come with conditions attached.

Mergers commissioner Ross Jones said the crucial issue was what would happen if the commission refused permission and Impulse went into receivership.



The commission is now waiting on a report into the financial state of Impulse, which Qantas said faced liquidation if the takeover was not approved by Monday.

Under the Qantas proposal, Impulse would cease flying under its own brand and contract its fleet to the flagship carrier.

Qantas, which hopes to fold the Impulse assets into its new QantasLink regional brand, would then lend Impulse around $A50 million ($62 million) to buy back the cut-price carrier's institutional shares and provide working capital.

"What we have to look at is whether the acquisition of Impulse by Qantas would be so damaging to future competition that it would lead to even greater job losses and difficulties for the tourism industry and so on," Mr Jones said.

"These are the types of concerns that would come out if the acquisition led to one firm becoming so much stronger than its rivals."

Ansett and Virgin argue the proposal would inflict such serious damage on their operations that it should be rejected, even if that means the collapse of Impulse.

Ansett spokeswoman Heather Jeffery said it had not ruled out court action to block the bid.

Mr Jones said that any approval for the Qantas proposal was likely to have conditions attached, which could include the combined group sacrificing sought-after slots at Sydney airport.

"If we did a deal and approved the acquisition, it would probably have to come with conditions. I think everyone recognises that right from the start," he said.

"It may involve more than access to slots, it may involve access to terminals."

Qantas chief executive Geoff Dixon said this week that the carrier would accept losing a third of Impulse's Sydney airport slots, saying the commission had set a precedent when it forced Ansett to give up 30 per cent of Hazelton Airline's slots when it bought the regional carrier.

- REUTERS

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