Qantas has expressed confidence that its acquisition of Alliance Airlines will not dampen competition on regional flights after Australia’s competition regulator raised concerns in its preliminary report into the takeover.

The Australian Competition & Consumer Commission (ACCC) has found that the deal is likely to “substantially lessen competition” for air transport services to and from regional and remote areas in Queensland and Western Australia for corporate customers.

The two airlines currently compete in the supply of flights to mining and resource companies that need to transport "fly-in fly-out" workers. The ACCC said the acquisition would remove Alliance as the only competitor to Qantas on the Brisbane (BNE)-Moranbah (MOV) route.

In addition, the ACCC is also considering how the removal of Alliance’s aircraft leasing services would impact the ability of current and new entrants to compete against Qantas on regional routes. Alliance currently has a wet-lease agreement in place with Virgin Australia.

Qantas agreed in May to buy the 80% of Alliance that it does not already own for A$614 million ($424 million). The deal was followed shortly after by rival Rex buying "fly-in fly-out" operator National Jet Express from Cobham, which has been cleared by the ACCC.

In a statement, Qantas executive of associated airlines and services John Gissing said the airline would continue to work with the ACCC to ensure any competition concerns were addressed.

“The resources sector continues to grow and any new tender for airline services will be very competitive,” he said. “It makes a lot of sense for us to combine with Alliance to improve the services we can offer, which is a positive for both airlines as well as the travelling public.”

Separately, Qantas has announced plans to expand its South Pacific presence with the addition of Tonga to its passenger network.

The airline will fly weekly between Sydney (SYD) and Nuku’alofa’s Fua’amotu Airport (TBU) using Airbus A330s. The four and a half hour flights will be the only direct services between Australia and Tonga.

The inclusion of Tonga to the international network follows the recent commitment of weekly services to Samoa’s Faleolo International Airport (APW).

“Since the opening of Australia’s border, we have seen strong demand across our Qantas operated South Pacific services. In fact, Fiji is 50% higher than pre-COVID demand, Noumea is 13% higher and flights to Samoa are performing ahead of expectations,” a Qantas spokesperson said.

“We anticipate the Tonga services will be well-supported by both Tongan nationals and Australians and are excited to help strengthen family and community connections as well as boost tourism opportunities.”