Rex has lashed out at Qantas and called for government intervention, following its announcement of a new “commercially unsustainable” Sydney-Orange route.
On Wednesday, Qantas announced that it would be commencing services between Sydney and Orange for the first time, beginning on 20 July 2020.
The airline will reportedly operate three weekly return services between Sydney and Orange on its Q200 aircraft from 20 July, with plans to increase frequency later in the year.
In response, Regional Express (Rex) has released a fiery statement, which has called on the federal government to “review” any financial assistance provided to Qantas from the Australian Airline Financial Relief Package, the Domestic Aviation Network Support package and the COVID-19 Regional Airline Network Support Program.
The regional airline claims that Qantas has “demonstrated that it has spare funds to incur additional losses simply to weaken its competitor at this time of national crisis”, essentially arguing that Qantas has added the Sydney-Orange route as a means to undermine and weaken the financial standing of Rex.
In a statement seen by Australian Aviation, Rex claimed: “Orange currently averages a total of 40 passengers per week and barely fills up 30 per cent of Rex’s twice weekly return flights.
“Qantas intends to flood the market with another 216 seats a week making it an aggregate load factor of 11 per cent for the two carriers.”
Prior to the COVID-19 pandemic, Orange had 66,000 annual passengers, with Rex registering a 66 per cent load factor on this route.
“Even if passenger numbers return to pre-COVID levels in the next 12-18 months, Qantas’ entry would see a minimum of an additional 60,000 seats on this market, making the overall load factor for both carriers to be only 41 per cent. This is clearly commercially unsustainable,” the statement read.
Rex continued, and stated that QantasLink has made the decision to not yet re-commence services on some routes, including Sydney-Wellcamp, which could be fully underwritten by Commonwealth funding.
Instead, the airline is opting to service Orange, which reportedly does not qualify for Commonwealth funding.
“It is obvious that Qantas’ action is not competition on its merits but rather predatory behaviour aimed at weakening Rex at a time when all airlines, including Qantas, are sustaining operational losses, hoping that if Rex collapses it will have the regional aviation market to itself,” the statement said.
“Given that Qantas has enough money to engage in non commercially-viable ventures, it clearly shows that Qantas does not need any financial assistance.
“That being the case, the federal government should not be using tax payers’ money to prop up Qantas even as the latter leverages on its financial muscle to try to destroy both its domestic and regional competitors during this pandemic.”
Rex had previously lodged a complaint with the Australian Competition and Consumer Commission (ACCC) on 31 January 2020 with regards to Qantas’ “predatory behaviour”.
This comes just weeks after Treasurer Josh Frydenberg instructed the ACCC to monitor whether airlines are reintroducing capacity too quickly purely to damage rivals, following Qantas’ announcement to add 300 more return flights per week by the start of July.
The commission will look for “early signs of damage” or moves that could “damage a competitor or drive them off route”.
Fly into Spring with Australian Aviation’s latest print edition. Starting from $49.95 a year, you can read comprehensive coverage on all sectors of the industry to keep you in the loop. Get your hands on the subscription today. Subscribe now at australianaviation.com.au.