It seemed like a great idea at the time.
Until 2020 Rex, or Regional Express, was a successful independent airline, with extensive regional turboprop operations in NSW, as well as less extensive ones in other states.
Then Rex picked up some cheap leased 737s from Virgin Australia after it went into administration in 2020. The market looked likely to open up again as we came out of Covid, and with Virgin grounded and its recovery uncertain there was a unique opportunity.
So Rex expanded from just being a regional carrier and started competing with jet aircraft on the major Sydney-Melbourne-Brisbane routes. It should have worked well, with an already long-established regional operation complementing it, and - importantly – slots at Sydney Airport. Then Covid returned and things started to get more complicated.
More recently Rex expanded onto the Melbourne-Perth route, where competition levels were low and prices very high. Its $99 fare was quickly undercut by Virgin, which had previously been charging well above that price (although much lower than Qantas).
Back in 2021 the regional airline had got some new Singaporean investors to fund the added costs of getting into the bigger jets. It then went on to acquire half of National Jet Express and expand further in the FIFO market. Today it has nine 737s, but its regional fleet of Saab 340s is suffering from supply chain and pilot shortages and several of its regional aircraft are grounded as a result. There were suggestions that the original move was really designed to create a product that could be sold on to Bain Capital, which bought Virgin out of administration. But if that was the plan, Bain didn’t play ball.
Both Qantas/Jetstar and Virgin turned up the heat once Rex went into the capital city markets. Virgin in particular didn’t want new competition at a time when its owners were looking to sell down their initial investment.
It hasn’t helped either that Rex kept a low profile, with few travellers even aware it was actually flying the bigger routes, although its product was a good one, and on-time performance was better than the competition. Recently it was rumoured to be operating at about 20% load factors on the “Golden Triangle”– flying with eight out of 10 seats empty.
Meanwhile, the Australian Competition and Consumer Commission, ACCC, reported that fares on routes where Rex was operating were significantly lower than other routes.
The group has been losing money – for the six months to December 2023, its scheduled services lost $25 million. Its flying school has also been losing money. The financial situation won’t have improved, particularly as the market is softening now. Reporting on the most recent six months has been delayed and meanwhile a board spat is under way.
Right now, on 30 July, it looks as if the company will go into administration. Bookings have been closed for its jet services, but it’s still possible to buy regional flights.
It’s unlikely Rex will stop flying regional routes in the short term at least. They are critical to the economic and social well-being of country towns. Governments will probably feel pressure to help ease the airline through its difficulties.
But one thing appears certain: Rex won’t reappear in its current form.
Is there room for three airlines on the major domestic routes? There should be, but it will need some major changes in the way slots are allocated at Sydney Airport - and the new Western Sydney Airport.
The evolution of Australia's domestic airline market will be a hot topic at the upcoming Australia Corporate Travel Summit (ACTS) in Sydney on 13 November.
Peter Harbison Director, Greener Airlines Co-Founder, Australia Corporate Travel Summit (ACTS) |
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