Tuesday, 2 March 2021

Rex axes routes as Qantas moves in to kill competition

The Australian regional airline Rex has announced it has been forced to embark on a major revamp of its regional route network in response to aggressive predatory moves by Qantas into thin regional routes serviced by the company.

Rex’s Deputy Chairman, the Hon John Sharp AM, said, “Qantas has clearly embarked on a deliberate strategy of moving into Rex’s routes that can only support one regional carrier in an attempt to intimidate and damage Rex in its traditional regional market, hoping that Rex would be a less formidable competitor in the domestic market.” 

Qantas is making record losses during COVID and has received an estimated $1.2 billion in Commonwealth assistance to stay solvent but, despite this, feels it is appropriate to use taxpayers’ funds to finance the losses on new services whose sole objective is to weaken the competitor.”

The routes on which Qantas has announced it will be starting, or has started, services since the outbreak of COVID are listed below. All of these routes have only supported one regional carrier in the past and the current monthly passenger numbers are laughable. Even when passenger numbers return to pre-COVID levels, these routes would still be unable to viably support 2 carriers:

The Rex Board has decided to stand its ground in these routes even if inevitably both carriers will be making significant losses. Unfortunately, the expected drag on Rex’s financial position from the losses on the above eight routes will mean that Rex will be unable to continue subsidising marginal routes that we have serviced for the past 20 years. It is with a heavy heart that we are announcing the cessation of services to the five routes below once the government support through the RANS programme is discontinued at the end of March:

Sydney -Bathurst (20,000 passengers pre-COVID)
Sydney -Cooma (6,000 passengers pre-COVID)
Sydney -Lismore (12,000 passengers pre-COVID)
Sydney -Grafton (18,000 passengers pre-COVID)
Adelaide -Kangaroo Island (42,000 passengers pre-COVIDincluding Qantas)

In order to recover from the losses, Rex will, from April, commence new services to ports where Virgin Australia has retreated, leaving Qantas as the sole or dominant operator. The new services are from Sydney to:  Coffs Harbour (330,000 passengers pre-COVID)  Port Macquarie (190,000 passengers pre-COVID)

Rex also calls on the  ACCC  to take enforcement actions against  Qantas for its predatory behaviour. All carriers are facing existential challenges and the ACCC must do its part to ensure that the dominant carrier does not take advantage of the current situation to deliver pre-emptive strikes against its much smaller competitors,  especially at a  time when it  is receiving massive handouts to stay solvent. 

In this environment, the introduction of new competing services in fragile regional routes should beset aside by the ACCCuntil we return to a semblance of normality. Indeed, this is consistent with  the  public  benefit  criterion  accepted  by the  ACCC  when  it granted  authorisation  to  Rex  to enter into an unprecedented collaboration with Qantas on regional routes where the parties had competing services prior to the pandemic."

It is noteworthy that Qantas had not accepted numerous offers by Rex to enter into a collaborative partnership that optimises resources, as permitted under the authorisation, to achieve better outcomes for all stakeholders including the travelling public.

The regional airline also recently introduced a jet shuttle service between Melbourne and Sydney with fares starting off ar $49 and will be starting a route from Sydney to Gold Coast with fares from $69. 

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