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Competition watchdog again warns Qantas and Virgin to play fair

written by Hannah Dowling | March 3, 2022

Image by Seth Jaworski.

The chairman of Australia’s competition watchdog has again warned Qantas and Virgin against using their resources to drown out new market entrants Rex and Bonza.

Outgoing chairman of the Australian Competition and Consumer Commission Rod Sims spoke before the Committee for Economic Development of Australia on Thursday, where he said the ACCC will be paying particular attention to Qantas and Virgin in the coming months, to ensure they “do not fly new routes to damage competition”.

Sims largely refers to Rex, a previously all-regional carrier that began operating capital city routes in March 2021, and new budget carrier Bonza, which is expecting to launch on domestic leisure routes in mid-2022.

Sims said on Thursday that the watchdog will also be monitoring the country’s biggest airports, including Sydney, Brisbane, Melbourne and Perth, to ensure they don’t abuse their monopolised position.

“We are particularly focused on monitoring Rex’s and Bonza’s ability to access permanent slots at Sydney Airport,” Sims said.

It follows earlier comments made last week by Sims before the National Press Club, suggesting the watchdog will be eyeing Virgin and Qantas’ network decisions “very carefully” to ensure they “aren’t flying new routes that they previously didn’t at a loss to try and block the new entrants”.

“Such predatory behaviour can damage competition and the Australian economy,” he said.

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Sims is due to step down from his role as chairman of the ACCC next month.

It also comes after numerous accusations from Rex that Qantas has intentionally moved into its previously exclusive routes, in decisions that are likely to see both carriers lose profits.

The long-standing feud on this issue has seen a fiery war of words between Rex and Qantas over network expansion, which has seen Qantas’ chief executive, Alan Joyce, mock Rex’s “empty aircraft” and Rex deputy chairman John Sharp argue that he doesn’t know how Joyce can “look at himself in the mirror some mornings”. Qantas has consistently denied any wrongdoing.

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Most recently, Rex has doubled down on its plans to pursue “all legal avenues” against Qantas over the flag carrier moving into its previously exclusive routes.

The airline suggested in its half-year financial report, released last week, that it’s still working with litigation firm Clayton Utz, which it first appointed in August last year.

Rex said, “Clayton Utz are exploring all legal avenues to stop Qantas from abusing its market position in order to hurt its competitors through anti-competitive behaviour in the form of capacity dumping and predatory practices.

“Since Rex’s announcement in June 2020 to launch domestic routes, Qantas has tried to intimidate Rex by commencing services on nine regional routes in competition against Rex. The routes are marginal for one carrier and certainly too small for two airline operators.”

Qantas has previously said in response to the claims that “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.”

Rex’s new mention of legal action comes shortly after Qantas announced it would soon begin operating two weekly return flights between Sydney and Broken Hill – a route that Rex has operated solely for 18 years.

Rex Airlines has held a monopoly on Sydney-Broken Hill flights since 2004, and currently conducts daily return flights plus one return service on weekends on its 36-seat Saab 340 aircraft.

However, come Friday, 8 April, QantasLink will break Rex’s exclusive streak on the route, with twice-weekly return flights taking place on Mondays and Fridays on its fleet of 50-seat Dash 8 Q300 aircraft.

Speaking with ABC Radio in February, Sharp accused Qantas of “swamping” the market, in a decision that will ultimately mean Rex and Qantas will “now both lose money on the Broken Hill service”, given the fact that there will be far more seats available than demand dictates.

“You’ve got to think that we’ve been doing this by ourselves to Broken Hill for 18 years, since Horizon stopped flying, and Qantas has had all those years to come and fly and operate into Broken Hill, but they’ve chosen not to,” he said.

“Because they know they’ll never make money out of it with two operators.”

Sharp suggested that Qantas was only moving into the Broken Hill route in order to “retaliate” at Rex’s decision in late 2020 to expand into the domestic capital city market, placing it in competition with Qantas.

“They don’t like that, and they’ve made lots of complaints to people about our behaviour in moving into that market. So, in retaliation, they’ve been moving into our regional market,” Sharp said.

Rex, however, is itself planning more capital cities flights and said it could even expand its fleet to fly up to 30 Boeing 737s over the coming five to seven years.

The news was revealed by Rex chairman Lim Kim Hai at the iconic Singapore Airshow, and nearly doubles Rex’s previous public fleet expansion goals.

“That’s a very good medium-term objective,” Lim said. “There’s a lot to be said for economies of scale.”

Comments (7)

  • Barrie

    says:

    It’s also to be hoped that ACCC’s Rod Simms, or his replacement, is/will be also checking inroads by Rex’s Sharp’s making into main trunk routes.

    Sharp must think Rex going to become very ‘profitable’? within 5-7 years’ to afford leasing another 24 second-hand Boeing 737’s.

    As for his ‘legal’ threats against QANTAS, he’ll regret his actions. It sure doesn’t ‘endear’ him, or his airline, to the travelling public.

  • Rod Pickin

    says:

    “The routes are marginal for one carrier and certainly too small for two airline operators.” These are the words attributed to REX over the planned QF ops at Broken Hill; – surely the same could be said about five operators intending plying their trade along and about the nations main line routes but the ACCC appears not to consider this fact neither it would appear does the ACCC consider the proposed take over of the Eraring Power Station a threat to our nations’ power availability and stability. With respect, it could appear that the ACCC is maybe not looking at the total picture, just the name of the artist at bottom right.

  • Anon

    says:

    1. Why is it ok for Rex to fly new routes and bring competition with their jets but not ok for Qantas or Virgin to do the same on regional routes?

    2. If we want to monitor fair play, maybe there should be an investigation into the multiple government handouts that Rex have secured. You can’t cry bankruptcy one minute and then buy jets with the money the next.

  • Taylor

    says:

    Funny how Simms doesn’t mention about ‘watching’ Rex’s movements’ onto the ‘golden triangle’ routes’.

    As for Sharp’s jealousy court case against QANTAS, it’s a petty move, & one that he won’t win.

  • Truman

    says:

    What ACCC should focus on is the predatory monopolistic airports killing airlines with high fees and poor slot management both landing and parking.

    • phil

      says:

      Impossible. The only new [er] build airport of late is ”Brisbane-West” at Toowoomba. Sydney is spending BILLIONS building an airport in the western suburbs. Its alternate could be Richmond. Melbourne has two alternates to Tulla; Essendon [yes] and Avalon , aka Geelong airport. Adelaide .. hmm revert to Parafield ..unlikely. Perth – idk.

  • chris

    says:

    Essendon is an airport you would divert away from (i.e. to Tulla or Avalon), not the other way around…

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