President’s column – 24 April 2020

Regional Express (REX) delivered an ultimatum to South Australian regional councils last week: reduce your airport fees for five years or we’ll cease all flights, permanently – and you’ve got four days to call a special meeting and agree.

Anyone familiar with REX’s past dealings with Local Government would not have been surprised by last week’s outrageous demand.

This is a company that readily criticises or threatens councils looking to increase fees or charges for their airports, even when the result of cost-shifting by the Commonwealth or because of CPI increases.

On occasion, REX has lashed out at councils for making significant capital investments to improve the safety or amenity of their airports – citing these as a pretext for raising levies or charges.

Threats to leave town are its stock in trade.

It suggested there are “greedy councils that want to extort as much money as possible from airport fees and charges so that it [sic] can finance its own bloated administration or other hidden agenda of local councillors”.

This was gratuitous as well as inaccurate.

All the councils concerned – recognising the pressures airlines are currently under – granted REX (and QantasLink) concessions so they could keep flying to destinations like Port Lincoln, Mount Gambier, Kangaroo Island, and Ceduna.

They reduced or waived passenger head taxes and rental charges, and allowed both carriers to defer payment of passenger levies.

Moreover, they made plain their wish to work amicably with both companies, recognising the need to maintain essential services such as medical treatment and freight services.

However, REX unilaterally decided this wasn’t enough and demanded the councils sign long-term 5-8 year contracts – even as it was negotiating with state governments for additional money and bidding for Commonwealth grants to underwrite airline operating costs and guarantee core routes remain open during the Covid-19 pandemic.

To their credit, the councils rejected REX’s extortionate bid, doing so in businesslike but polite terms.

Kangaroo Island Mayor Michael Pengilly’s response was typical: “Attempts to push the boundaries for airport operators in very difficult times are unfair and unreasonable.”

“Half our Island was destroyed by fires, our tourism trade has disappeared, and being pushed into a corner with long-term agreements is not appreciated.”

“We are prepared to have reasonable and productive discussions but we need more than five days to do it.”

Other councils are in a similar financial predicament to Kangaroo Island thanks to Covid-19.

The District Council of Coober Pedy, with significant debt, has no financial capability to help anyone. But it continues to “work quietly behind the scenes” to restore air services to pre-Covid-19 levels.

As it happens, REX was spared from having to follow through on its threats when it signed a Commonwealth Grant Agreement this week.

The money the airline gets under the Regional Airline Network Support (RANS) program will allow it to operate one or two return services a week to most of its network destinations.

REX has also applied for further federal funding to resume flights from Adelaide to Coober Pedy and Mildura in Victoria, and double the current reduced number of weekly flights to SA regional towns.

After the announcement, Whyalla City Council Acting Chief Executive Officer Kristen Clark said: “The pandemic has created many challenges for all airlines.

“Whyalla Council will continue to work with partners who are committed to a sustainable airport, one that is not subsidised by ratepayers”.

That’s a widely held view in Local Government, and one REX appears not to grasp at a time when many businesses (including regional airports) are walking a financial tightrope.

And unlike REX, and despite ALGA’s determined advocacy, Local Government is ineligible for JobKeeper or newly created sources of Commonwealth funding to maintain the many services they provide their communities and almost every council is losing revenue every day.

That REX fails to acknowledge this while aggressively pushing its longer term commercial agenda is deplorable.

Mayor David O’Loughlin
ALGA Presiden