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Rex’s ‘limited network’ no threat to Qantas, says Joyce

written by Adam Thorn | December 4, 2020
Rex new livery
Rex has finally revealed the livery that will sit on its new fleet of Boeing 737s

Qantas chief executive Alan Joyce has brushed aside Rex’s threat to his business’ market share, arguing the regional airline will be hamstrung by its “limited network” and higher ticket prices.

Responding to a question from Australian Aviation on Thursday, Joyce said, “We’re very confident in our relative position and what that means for our market share, which should be above 70 per cent going forward.”

His comments come days after Rex started selling tickets for its new capital city routes between Sydney and Melbourne on 1 March, with plans to expand flights to Brisbane by Easter. It marks the first major new competitor for the so-called Golden Triangle in two decades.

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Joyce was speaking to the media after Qantas gave a quarterly update to the ASX, revealing it hopes to break even at an underlying level in the first half of this financial year, and be “net free cash flow positive”, excluding redundancies, in the second half.

Qantas currently estimates it holds around 70 per cent of the market, about 10 per cent more than it did pre-COVID.

“The first thing we have to say is that obviously the market has changed through this year,” said Joyce. “Our major competitor, Virgin, has handed back a lot of aircraft, A330s, ATRs and some of their 737s so they are going to be significantly smaller than they were before COVID.

“We’ve also seen a significant move of demand towards Qantas. We mentioned the 25 corporate accounts that have moved across to us in the last year. I haven’t seen anything of that scale, ever. So we know the corporate market is moving for Qantas.

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“And we can see with Jetstar, certainly with Tiger removed from the market, that the low-cost market is moving towards Jetstar, too. So we also believe that there’s been a big strategic advantage for Qantas by having a bigger network of more frequencies.

“And that is very important from the research into our corporate customers. It is our intention to maintain those advantages and a result of all of that means we think our market share will be about 70 per cent. That is sustainable going forward.

“We’ve also added a whole series of new routes – you can see the 11 new routes that we mentioned – they’re filling up really well.

“That’s part of us maintaining the share of market advantage. Rex are talking about a staged approach into the market. We’re very confident in our position, Jetstar will still have a significantly lower cost base because it has scale advantages over Rex.

“Jetstar is offering lower air fares than Rex, even today when they launched. And we do believe from the business market, Rex’s network is extremely limited and the business corporate market is going to be still very attractive to the proposition Qantas has.

“Qantas as an example is opening up 30 of its 35 lounges domestically, before Christmas. Our next major competitor has only six lounges and there’s question marks over some of them.

“Qantas loyalty program has been announcing a number of announcements in the last few weeks about maintaining people’s status, which is being well received, and matching status on other airlines, which we’ve had thousands of customers respond to.”

Earlier this week, Rex confirmed it would initially operate nine return services a day between the two cities, with sale prices starting at $79. Economy tickets will include checked baggage, food and pre-assigned seating – indicating Rex will pursue a ‘mid-market’ hybrid strategy.

Rex deputy chairman John Sharp said on Wednesday, “The first three Rex Boeing 737-800s will take off between Sydney and Melbourne on 1 March 2021.

“Rex will begin with nine Sydney-Melbourne return services a day. By Easter, two additional 737s will be added to expand our domestic network to Brisbane and other capital cities. If all things go as planned, we hope to grow our fleet to 8-10 by the end of 2021.”

“Rex will offer all the usual perks of a full-service carrier including eight Business Class seats,” said Sharp. “All fares include checked baggage allowance, food, pre-assigned seating and online check-in. Lounge access and on-board Wi-Fi will be free for Business Class, whilst Economy passengers can access these options for a small fee.”

Rex only last month signed off on a $150 million investment that will allow it to expand its operations to fly capital city routes with six leased Boeing 737s.

The airline will draw down an initial $50 million in January next year from PAG Asia Capital and the deal will see the APAC organisation nominate two directors to sit on the board.

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10 Comments

  • Peter

    says:

    In his dreams. REX inclusions re baggage snacks etc. Mr Joyce I think has underestimated.

  • Steve A

    says:

    Breaking even at an underlying level, is not breaking even. Breaking even at a statutory level after tax is what is required.
    Breaking level at an underlying level is just spin-doctoring to make the market think that your share price is worth much more than it really is, and to justify the recommencement of management bonuses for ‘saving’ the airline once again.
    But Qantas isn’t the same.
    It’s a hollowed-out shell of its former self after severe asset-stripping, severe asset-ageing, severe dumping of staff expertise, just to mention a few things.
    For Mr Joyce to be waxing lyrical already is totally premature.
    Qantas may never be the same after 12 years of his leadership.

  • Ben

    says:

    They said that about Impulse 20 years ago then bought it out so it didn’t become competition.

  • Peter Hannah

    says:

    The “ARROGANCE” of Alan Joyce!!

    9 flights a day between Sydney and Melbourne – and then focusing on Brisbane Sydney and Melbourne – I think is a bit of a threat. Particularly, if people find that the Rex system is a worthy carrier!!

  • james

    says:

    the golden triangle is where the profits are & Qantas will lose market share on it’s most profitable routes.

  • Ben

    says:

    Capacity dumping in 3, 2, 1… They have the reserves that VA doesn’t and the size that ZL doesn’t. So I’m thinking it will be the standard play, dump capacity on the routes, rock bottom prices until they push enough business over to them and then normalise once the other two back off.

  • Benedict

    says:

    Neither is the ‘other’ airline…….

  • Scott Barrowman

    says:

    Alan Joyce, I would rather give someone like Rex a go and see if they can do a better job. You recently wanted $710 for Brisbane to Adelaide direct. That’s just extortion.

    You treat your staff poorly and a lot of your airline’s makeup is greed.

  • Warwick

    says:

    To Peter, at top….

    QANTAS CEO Alan Joyce underestimates nothing!
    The Company will be heading for an albeit, reduced profit, FY21, but a profit none the less.

  • Nate

    says:

    Rex’s FF scheme’s not starting until March 2022, a year AFTER they’ll possibly start flying on main trunk routes’.
    It’ll be interesting to see, if by then, they’ll still be flying those routes’.
    There’s many a hurdle for Rex to overcome, in the meantime.

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