Rex flags regional services cuts citing ‘predatory’ Qantas behaviour

Regional Express (Rex) says it plans to terminate several NSW services as well as its Adelaide-Kangaroo Island route after government subsidies end in March.

The decision follows Qantas’s launch of 26 new regional routes, including eight which overlap with Rex’s existing network.

In a statement to the Australian Securities Exchange (ASX) on Monday, Rex deputy chairman John Sharp said Qantas Link’s launch of flights on existing monopoly routes was predatory behaviour aimed at making it a “less formidable competitor” when it launches its new Sydney-Melbourne service next week.

“Qantas has clearly embarked on a deliberate strategy of moving into Rex’s routes that can only support one regional carrier in an attempt to intimidate and damage Rex in its traditional regional market,” Mr Sharp said in the statement to shareholders.

Since the start of the Covid-19 pandemic, Qantas has launched, or is planning to launch, services on eight routes where Rex previously had a monopoly: Sydney to Orange, Merimbula and Griffith; Melbourne to Merimbula, Albury, Wagga Wagga and Mount Gambier; and Adelaide to Mount Gambier.

Mr Sharp said that while Rex would “stand its ground in these routes, even if inevitably both carriers will be making significant losses”, the drag on its financial position would force it to cease flying on five other “marginal” routes: Sydney to Bathurst, Cooma, Lismore and Grafton – all routes on which Rex is the only airline operating – as well as Adelaide to Kangaroo Island (which Qantas entered last year).

Rex said it would pull those services when the federal government’s Regional Airline Network Support (RANS) package ends in March.

The RANS program was designed to maintain air connections to regional Australia amid a collapse in passenger numbers at the start of Covid-19, and came after Rex threatened to ground its entire fleet unless the government underwrote its operations.

Rex received $62 million in government subsidies last financial year, allowing it in part to post increased revenues.

Asked whether the Federal Government is considering extending its Regional Airlines Funding Assistance Program, Senator Michaelia Cash (the Minister representing the Minister for Infrastructure, Transport and Regional Development in the Senate) said: “we’ll continue to monitor the situation and continue further support if necessary”.