Australia’s REX is firming up plans to take on the big boys next year by flying the revenue rich golden triangle flights of Australia’s southeast. The regional airline said on Tuesday that it had secured US$107.5 million in funding to kickstart the flights. By this time next year, REX plans to be running Boeing 737-800 aircraft on the Brisbane-Sydney-Melbourne-Brisbane triangle. In normal times, they are some of the busiest and most lucrative airline routes in the world.
REX’s jet plans firm up
Earlier this year, REX announced plans to operate jets on domestic Australian trunk routes. It’s a big step up for a regional airline that’s long operated an all Saab A340 fleet out from Australia’s capital cities to country towns. Many dismissed it as bluff and opportunism in the wake of Virgin Australia’s collapse.
But the regional airline, majority-owned by Singaporean interests, looks like it might be serious. Word is they are taking around eight leased Boeing 737-800s off Virgin Australia’s hands. That airline is sold and staying in the air, albeit as a smaller version of its former self.
On Tuesday, REX said it had secured funding to commence jet operations. That money is coming from PAG, an Asian investment firm best known in Australia for its investments in the fast-food sector.
“With PAG’s support, I have every reason to believe that Rex can successfully launch its
domestic major city jet operations,” said Rex’s Executive Chairman, Mr Lim Kim Hai, yesterday.
“As a well-established carrier with an impeccable track record, I am confident that Rex will
deliver to Australians an alternative major city domestic service that is safe, reliable and
affordable.”
The US$107.5 million comes in two parts. REX will have access to $36 million by the end of the year and can draw down a further $71 million over the next three years. In exchange, PAG will end up the majority shareholder in REX.
The deal is subject to approval by Australia’s Foreign Investment Review Board.
What’s REX planning with its new Boeings?
REX’s move into the busy southeastern golden triangle routes is keenly watched. It’s a market that Qantas will dominate as Virgin Australia scales back the number of planes it operates. Where will REX fit in, and what to expect?
REX says it will operate as a hybrid model, pitching itself in that fraught middle ground between a low-cost carrier and a premium carrier.
“Rex’s domestic operations will be priced at affordable levels but will also include baggage
allowance, meals on board, and pre-assigned seating,” said Rex’s Deputy Chairman, John Sharp, in June.
Whether REX offers a two-class cabin product remains unknown. The airline has small lounges in Sydney, Melbourne, and Adelaide, which will get retained. REX is reportedly busy recruiting ex Virgin Australia crews and ground staff – a canny move given their familiarity with the planes.
There’s an expectation some proving flights will run later this year with revenue flights commencing in March 2021.
A lot of people are quietly cheering REX on
REX’s flights are likely to prove popular with loyalty free leisure and ad-hoc travelers flying between Australia’s biggest cities. Prising the corporate customers away from Qantas may prove a tougher ask. But small business owners and value-driven professionals may be far more willing to forsake the Qantas Club for the Rex Lounge.
Plus, REX will get feeder traffic on and off its 1,500 flights a week to rural and regional destinations.
While both Qantas and Virgin Australia remain decidedly unenthused about REX’s incursion onto their turf, a lot of regular travelers on the golden triangle routes are quietly cheering the airline on and keeping a weather eye on how REX’s ambitions pan out.