Australia’s Regional Express (Rex) is reporting patchy demand across its network, averaging 60% of pre-pandemic levels. But there are bright spots. Demand in Queensland is exceeding 2019 levels. Overall, Rex is confident it will break even in the 12 months to June 30, 2021.
Operational update from Rex
On Monday, Rex provided an update on its operations. These days, Rex is best known for challenging Qantas and Virgin Australia on revenue-rich interstate trunk routes such as the Sydney and Melbourne route. But the airline’s longstanding core business is regional flying across much of Australia using a fleet of Saab 340s.
“Rex is cautiously expanding its regional network in an effort to stimulate demand. We are keeping our capacity growth about 5% ahead of demand growth,” the airline said on Monday. “Rex’s regional capacity is therefore 35% of what it was pre-COVID.”
Rex’s regional flights reach into all states and territories except the Northern Territory. Those flights include some interesting government-subsidized milk runs through Queensland.
While Rex has been happy to take it up to players like Qantas, stepping onto their turf flying Boeing 737-800s on key interstate trunk routes, Rex is less happy when Qantas returns the favor. Through its regional brand QantasLink, Qantas has made big inroads into regional flying in the last year, including onto routes Rex has previously enjoyed a monopoly on.
Some support for Rex’s anti-Qantas stance
In the last 12 months, Qantas has started services on eight regional routes previously the sole domain of Rex. Last week, Qantas further upped the ante, announcing QantasLink flights between Melbourne and Burnie (a port town in northern Tasmania).
Passengers generally welcome the competition and the downward pressure on fares it brings. But Rex is furious, saying these routes cannot support two airlines. Rex says Qantas’ move is about forcing a smaller player out of the market. Qantas says this isn’t the case, and Rex simply doesn’t handle competition well.
However, Rex’s argument does have some supporters. Some local business bodies have queried Qantas’ move into Burnie. Business Northwest’s tourism spokesman Justin McErlain told Burnie’s The Examiner newspaper he had questions over the airline’s commitment to the town. While the competition would bring fares down, Mr McErlain asked how long Qantas would stick around if they forced Rex out.
“We need to know if they are in it for the long haul or not,” Mr McErlain said. “We don’t want to end up in six months without an airline.”
Earlier this month, Max Hazelton, an old school airline operator who started Rex’s predecessor airline in a paddock outside Orange (New South Wales) 68 years ago, told The Australian newspaper Qantas had some form in this regard.
“Everywhere we went, like Armidale and Tamworth, it was working quite well, but then Qantas came in, cut the fares considerably, and basically killed us,” said Mr Hazelton.
“They were fair old buggers doing that. Anywhere we went, they would cut the fares. That is the battle we had. Taking on the big boys like that is a very difficult situation.”
Don’t feel too sorry for Rex
Qantas says it doesn’t startup new routes unless it thinks they’ll be profitable. The airline notes extra capacity on routes generally stimulates demand. Earlier this year, a senior Qantas executive called Rex’s protests a “classic Rex tantrum.
On the same day Rex provided its operating update, they welcomed a move by competition watchdog, the Australian Competition and Consumer Commission (ACCC), to look at capacity dumping on regional and interstate routes in Australia.
Don’t feel too sorry for Rex. Behind the folksy facade are some pretty sharp airline operators. As for busting onto regional routes that previously belonged to other airlines, Rex has started flying between Sydney and Coffs Harbour and Sydney and Port Macquarie. These are routes QantasLink has previously dominated. To date, Qantas has taken this on the chin without complaint. For the record, Qantas has always said it welcomes competition.
