Regional Express axes five routes, blames ‘predatory’ behaviour by Qantas

Regional Express will axe five routes, blaming Qantas for its aggressive foray into regional flight paths while international travel remains off the table. In a statement lodged to the Australian Stock Exchange on Monday, the regional focused aviation group said it would “revamp” its flight network after “predatory” moves by the country’s largest airline to cost out Rex on routes that can only sustain one carrier.
Flights from Sydney to Bathurst, Cooma, Orange and Grafton, and Adelaide to Kangaroo Island will be cancelled by the end of March.
Rex deputy chairman John Sharp said Qantas was deliberately attempting to damage the airline’s traditional regional market.
“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,” he said.
“Qantas is making record losses during COVID and has received an estimated $1.2bn 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.”
It is understood Qantas only operates on one of the five routes Rex has announced it would axe.
Deputy Premier and Regional NSW Minister John Barilaro issued a statement saying Qantas had “sabotaged” its rival, adding that regional communities would suffer.
“Rex in its DNA is a regional and rural airline, and it is doing its best to fill the gaps left by Virgin, while Qantas is trying to cripple Rex before it even gains a foothold in some regional markets,” Mr Barilaro said.
“Qantas seems motivated only by its own narrow commercial interest, not what is in the best interest of the community.
“Throughout COVID, Qantas has received more than $1.2 billion in taxpayer subsidies. Their focus should be on servicing airline routes which have been lost, not trying to use the current economic climate to monopolise the market, by crippling a dedicated regional airline.”
Mr Barilaro said he intended to call on the federal government to make sure regional carriers wouldn’t be forced to leave behind any regional communities when a federal emergency funding program ended next month.
He also said he would call on the commonwealth to encourage Sydney Airport to open up any landing slots made inactive to companies such as Rex.
Qantas has moved into a number of regional destinations since the start of the coronavirus pandemic, including Byron Bay, Cairns and Merimbula.
The new services are primarily due to the expected surge in domestic travel due to closed borders.
QantasLink chief executive John Gissing said the harsh rhetoric was a “classic Rex tantrum” and the company was “trying to blame Qantas for other challenges” it might be facing.
“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,” Mr Gissing said.
“The fact is Rex is receiving millions of dollars in bespoke government assistance for its regional operations at the same time as it’s acquiring new aircraft to fly between capital cities.”
Mr Sharp said Rex would stand its ground on routes such as Sydney to Merimbula, Melbourne to Wagga Wagga and Adelaide to Mt Gambier, where Qantas has announced new flights.
The airline noted retaining these routes would come at the expense of keeping certain routes in operation.
“The Rex board has decided to stand its ground in these routes, even if inevitably both carriers will be making significant losses,” Mr Sharp said.
“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.”
Rex has called on the Australian Competition and Consumer Commission (ACCC) to enforce action against Qantas for actively trying to swallow up the majority of the Australian aviation market share.
Mr Gissing said Qantas would only operate on routes it believed were viable and where lower ticket prices could bolster travel demand to regional Australia.
“We don’t start routes if we don’t think they will be commercially viable for us,” he said.
“We know that extra capacity and lower fares increases overall travel demand, which is good news for the regional communities we will be operating to.”
Mr Sharp said Rex would begin new routes in April from Sydney to Coffs Harbour and Port Macquarie, which pre-COVID-19 had respective passenger volumes of 330,000 and 190,000.
The airline said it would look at setting up operations on routes where Virgin Australia had pulled out or Qantas was the only carrier offering flights.
These services include Sydney to Tamworth, Sydney to Canberra, Melbourne to Devonport and Perth to Geraldton.
“We will be launching services to these cities once a partnership agreement is concluded with the local councils or airport owners,” Mr Sharp said.
“Our plans to commence domestic jet services on the Sydney-Melbourne route on March 1 are still firm barring further border closures.”
According to Rex, Qantas has rejected any agreement to set up partnerships on certain routes where shared resources could help drive down costs.
Qantas confirmed it would review flight operations on routes Rex was threatening to pull out from.