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How regional airlines’ flip-flop negotiations with governments played out

written by Adam Thorn | April 7, 2020
A Rex Saab 340 (Rex)

On Wednesday, Rex temporarily reversed its decision to suspend Queensland passenger flights after a last-minute intervention from the state’s government.

The announcement is the latest in a dramatic negotiation between regional airlines and state and federal government, that has featured brinkmanship and U-turns from both camps.

Here, Australian Aviation breaks down how the story has played out:

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23 March

Rex delivered an ultimatum to the government to underwrite its losses, or else the airline would stop most of its services.  Rex’s deputy chairman, John Sharp, argued the previous package of help was not enough, saying, “The federal government has acted swiftly by promising a rescue package to the airlines of $715 million. However, the direct benefit to Rex from this package is only $1 million a month, which is grossly insufficient to cover the $10 million a month we expect to lose running the heavily reduced schedule we announced last week.” He added that “local councils are also a true disappointment”.

26 March

Eight regional airlines warned they could go out of business in “days rather than weeks” unless the government moved to underwrite Australia’s small airline operators. In a dramatic open letter, the consortium warned that an announcement of help needed to happen in 24 hours’ time.

The email, sent by Newcastle carrier FlyPelican, stated, “The government, while repeatedly proclaiming the importance of protecting regional aviation as a vital resource for growing the economy, appears, instead, to have wiped its hand of the industry at what is its most critical time.” Carriers signing the letter included Air Link, Aviair, Alliance Airlines, Chartair, Fly Corporate, FlyPelican, Hardy Aviation and Sharp Airlines.

27 March

Rex said it may not be able to transport COVID-19 testing samples from regional areas to capital cities for analysis unless it receives a government bailout. Australia’s largest independent airline said it would announce the “shutting down of its network” later that day if it hadn’t received “concrete proposals” of financial aid.

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John Sharp said, “The federal, state and local governments all need to act urgently and decisively to determine specific assistance packages so that the airlines can at least provide the bare minimum of essential air services to keep the communities running. “For example, Rex carries critical blood supplies daily to regional and remote communities on its network, as well as transporting COVID-19 testing samples from regional centres to capital cities for analysis. This may no longer be possible in the foreseeable future.”

28 March

Rex and the Airlines for Australia and New Zealand industry group both welcomed the $298 million government bailout for the regional airline industry.

John Sharp said the business had the “utmost gratitude” for the financial package, which would keep a revised schedule operating for six months. Sharp indicated that, without the aid, it would have stood down 90 per cent of its workforce.

“All regional communities and residents should be extremely grateful to the Coalition government for its commitment to the future of the regional cities,” Sharp said. “This meaningful assistance package not only seeks to keep essential air services going, but also tries to prevent the existing regional aviation providers from collapsing.”

31 March

Rex U-turned on its support for Saturday’s regional aviation bailout and said it would shut down Queensland passenger routes in 24 hours. In a statement, Regional Express said, “While the federal government has announced several assistance packages for airlines, no concrete details have been forthcoming and more importantly, not a single cent has been disbursed.”

1 April

Rex temporarily reversed its decision to suspend Queensland passenger flights after a last-minute intervention from the state’s government – but warned it may still cancel services if a final agreement isn’t reached in seven days’ time.

7 April

Rex raised the stakes in its fight for more financial aid yet again, this time claiming that “lives could be lost” if the airline is unable to transport medical tests on selected routes. The business praised Queensland and Western Australia for offering to subsidise essential services, but said, “no other states have shown any interest”.

25% off starts now! Australian Aviation magazine Cyber Monday sale is now live. Have the very best of Australian Aviation’s annual print and digital subscription. This includes every In Focus and Behind the Lens digital magazine, special coverage, exclusive photos and editions you may have miss. Subscribe now at australianaviation.com.au.

4 Comments

  • Barrie Smeaton

    says:

    Why does not the government do a loop around Australia the have 2 bombardia aircraft sitting in Cairns after all this is a crises situation

  • Craigy

    says:

    There is something really wrong with the mentality of REX management. All this ultimatum nonsense through the press demanding money otherwise they will shut the doors does not help their position in the eyes of the public. If Sharp continues on like this, I for one would be happy to see REX stop flying and use the money on other regionals including Qlink and Virgin to pick up the pieces.

  • Tom

    says:

    This is blackmail. Let Rex collapse and give the flying to local businesses run by Australians. Rex are foreign owned, and the shareholder refuses to use their own money, instead wanting to spend ours! Get stuffed!

  • AlanH

    says:

    I am totally gobsmacked that the Deputy Prime Minister, Michael (Spineless) McCormack, and Leader of the National Party of course, should acquiesce to these bully tactics by John Sharp on behalf of Rex and its Singaporean owners. You don’t see the other regional airlines adopting these sort of stand-over tactics. If Rex is so “regionally-minded” why do they not fly from Merimbula-Canberra or Moruya-Canberra, which is the biggest and closest city to the NSW south coast? Because they don’t like the landing fees that CBR airport charges and they can’t be bothered negotiating a better deal. Better and easier to just dummy-spit which seems to be their preferred modus operandi. So much for having a regionally-focused mindset! And who are the biggest whingers when QA or VA regional flights decide to lob into their territory – Rex. It’s called competition John, you don’t have a monopoly on those regional destinations. Man up! As for suggesting that “lives may be lost” if Rex isn’t bailed out … really? Why do we have the RFDS and the RAAF for that matter?

Leave a Comment to Craigy Cancel

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How regional airlines’ flip-flop negotiations with governments played out

written by Adam Thorn | April 7, 2020
A Rex Saab 340 (Rex)

On Wednesday, Rex temporarily reversed its decision to suspend Queensland passenger flights after a last-minute intervention from the state’s government.

The announcement is the latest in a dramatic negotiation between regional airlines and state and federal government, that has featured brinkmanship and U-turns from both camps.

Here, Australian Aviation breaks down how the story has played out:

Advertisement
Advertisement

23 March

Rex delivered an ultimatum to the government to underwrite its losses, or else the airline would stop most of its services.  Rex’s deputy chairman, John Sharp, argued the previous package of help was not enough, saying, “The federal government has acted swiftly by promising a rescue package to the airlines of $715 million. However, the direct benefit to Rex from this package is only $1 million a month, which is grossly insufficient to cover the $10 million a month we expect to lose running the heavily reduced schedule we announced last week.” He added that “local councils are also a true disappointment”.

26 March

Eight regional airlines warned they could go out of business in “days rather than weeks” unless the government moved to underwrite Australia’s small airline operators. In a dramatic open letter, the consortium warned that an announcement of help needed to happen in 24 hours’ time.

The email, sent by Newcastle carrier FlyPelican, stated, “The government, while repeatedly proclaiming the importance of protecting regional aviation as a vital resource for growing the economy, appears, instead, to have wiped its hand of the industry at what is its most critical time.” Carriers signing the letter included Air Link, Aviair, Alliance Airlines, Chartair, Fly Corporate, FlyPelican, Hardy Aviation and Sharp Airlines.

27 March

Rex said it may not be able to transport COVID-19 testing samples from regional areas to capital cities for analysis unless it receives a government bailout. Australia’s largest independent airline said it would announce the “shutting down of its network” later that day if it hadn’t received “concrete proposals” of financial aid.

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John Sharp said, “The federal, state and local governments all need to act urgently and decisively to determine specific assistance packages so that the airlines can at least provide the bare minimum of essential air services to keep the communities running. “For example, Rex carries critical blood supplies daily to regional and remote communities on its network, as well as transporting COVID-19 testing samples from regional centres to capital cities for analysis. This may no longer be possible in the foreseeable future.”

28 March

Rex and the Airlines for Australia and New Zealand industry group both welcomed the $298 million government bailout for the regional airline industry.

John Sharp said the business had the “utmost gratitude” for the financial package, which would keep a revised schedule operating for six months. Sharp indicated that, without the aid, it would have stood down 90 per cent of its workforce.

“All regional communities and residents should be extremely grateful to the Coalition government for its commitment to the future of the regional cities,” Sharp said. “This meaningful assistance package not only seeks to keep essential air services going, but also tries to prevent the existing regional aviation providers from collapsing.”

31 March

Rex U-turned on its support for Saturday’s regional aviation bailout and said it would shut down Queensland passenger routes in 24 hours. In a statement, Regional Express said, “While the federal government has announced several assistance packages for airlines, no concrete details have been forthcoming and more importantly, not a single cent has been disbursed.”

1 April

Rex temporarily reversed its decision to suspend Queensland passenger flights after a last-minute intervention from the state’s government – but warned it may still cancel services if a final agreement isn’t reached in seven days’ time.

7 April

Rex raised the stakes in its fight for more financial aid yet again, this time claiming that “lives could be lost” if the airline is unable to transport medical tests on selected routes. The business praised Queensland and Western Australia for offering to subsidise essential services, but said, “no other states have shown any interest”.

25% off starts now! Australian Aviation magazine Cyber Monday sale is now live. Have the very best of Australian Aviation’s annual print and digital subscription. This includes every In Focus and Behind the Lens digital magazine, special coverage, exclusive photos and editions you may have miss. Subscribe now at australianaviation.com.au.

4 Comments

  • Barrie Smeaton

    says:

    Why does not the government do a loop around Australia the have 2 bombardia aircraft sitting in Cairns after all this is a crises situation

  • Craigy

    says:

    There is something really wrong with the mentality of REX management. All this ultimatum nonsense through the press demanding money otherwise they will shut the doors does not help their position in the eyes of the public. If Sharp continues on like this, I for one would be happy to see REX stop flying and use the money on other regionals including Qlink and Virgin to pick up the pieces.

  • Tom

    says:

    This is blackmail. Let Rex collapse and give the flying to local businesses run by Australians. Rex are foreign owned, and the shareholder refuses to use their own money, instead wanting to spend ours! Get stuffed!

  • AlanH

    says:

    I am totally gobsmacked that the Deputy Prime Minister, Michael (Spineless) McCormack, and Leader of the National Party of course, should acquiesce to these bully tactics by John Sharp on behalf of Rex and its Singaporean owners. You don’t see the other regional airlines adopting these sort of stand-over tactics. If Rex is so “regionally-minded” why do they not fly from Merimbula-Canberra or Moruya-Canberra, which is the biggest and closest city to the NSW south coast? Because they don’t like the landing fees that CBR airport charges and they can’t be bothered negotiating a better deal. Better and easier to just dummy-spit which seems to be their preferred modus operandi. So much for having a regionally-focused mindset! And who are the biggest whingers when QA or VA regional flights decide to lob into their territory – Rex. It’s called competition John, you don’t have a monopoly on those regional destinations. Man up! As for suggesting that “lives may be lost” if Rex isn’t bailed out … really? Why do we have the RFDS and the RAAF for that matter?

Leave a Comment to Craigy Cancel

Your email address will not be published. Required fields are marked *

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