Rex will drop five regional routes to stem losses as it prepares to compete head-on with flag carrier Qantas.
The short-haul carrier, which mainly operates a fleet of Saab 340 turboprops, announced plans to terminate services from Sydney to Bathurst, Coomba, Lismore, and Grafton, in addition to Adelaide to Kangaroo Island, once government subsidies end in March.
The decision follows Qantas’ launch of 26 new regional routes, including eight which overlap with Rex’s existing network. Qantas’ expansion, with flights such as Sydney to Orange, has been called a “predatory move” by Rex due to low passenger numbers on the competing routes.
“The Rex Board has decided to stand its ground in these routes even if inevitably both carriers will be making significant losses,” said John Sharp, Deputy Chairman at Rex.
“Unfortunately, the expected drag on Rex’s financial position from the losses on the eight routes will mean that Rex will be unable to continue subsidising marginal routes that we have serviced for the past 20 years.”
Qantas argued that extra capacity and lower fares “increases overall demand” to regional communities.
“Rex’s idea of competition is that it’s something that happens to other people, because they believe they have an enshrined right to be the only carrier on some regional routes,” said John Gissing, CEO at QantasLink, the carrier’s regional arm.
“It feels like Rex is trying to blame Qantas for other challenges they may be having. We don’t start routes if we don’t think they will be commercially viable for us.”
Last year, Rex announced plans to compete with Qantas and Virgin Australia on lucrative routes between Sydney, Melbourne, and Brisbane, using a fleet of leased Boeing 737-800s. The carrier’s first Sydney to Melbourne service is scheduled for March 1.
“The ACCC is aware of Rex’s concerns. The process of competition can be vigorous and robust as firms compete for consumers,” a Australian Competition and Consumer Commission spokesperson told Business Traveller.
“We will continue to monitor the airline industry as it recovers. The ACCC’s monitoring direction and competition and consumer law provisions means we are well-placed to act if we have concerns that particular conduct may have an anti-competitive purpose or effect.”