Australia’s biggest airline Qantas is being accused of punishing smaller rival Regional Express (Rex). Rex’s Deputy Chairman John Sharp made the claim on a Sunday morning interview on Sky News.
Ongoing route skirmishes between Qantas and Rex
Both Qantas and Rex have moved onto several of each other’s routes in the last year. But Rex accuses the far larger Qantas of capacity dumping on select regional routes, knowing they will lose money, but driven by a desire to push Rex off those routes.
With the worldwide travel downturn clipping Qantas’ international wings, Qantas has refocused its attention on its home market. Since March 2020, Qantas and its subsidiary airlines have moved onto 38 new routes within Australia. Nine of those routes were regional routes solely serviced by Rex.
In turn, Rex has moved onto two regional routes Qantas enjoyed a dominant market share on. Rex also launched jet services and is now competing directly with Qantas on six mainline domestic routes.
Rex’s Deputy Chairman says there a big difference between what Qantas and Rex is doing
But according to John Sharp, there’s a big difference between what Rex is doing and what Qantas is doing.
“Why would an airline that reported a $1.47 billion statutory loss for the first half of this current financial year, why would you want to add to those losses by moving onto new routes where you know you are going to lose money?” Mr Sharp asked about Qantas.
“The reason they (Qantas) are doing is not that they think that they’ll make money. They know they are going to lose money. They are doing it because they want to punish us.
“What they’re trying to do is to get Rex to bail out, to give up operating these (regional) routes, and to create a position where Rex’s cost structure is such that it can’t sustain any of its regional operations.”
Simple Flying approached Qantas to get their response to these comments. Qantas declined to address Mr Sharp’s comments directly. However, Qantas has previously said they don’t launch onto routes unless they think there is money to be made. Qantas has also previously said new entrants on a route usually spark an uptick in demand. The airline consistently states they welcome competition, saying it makes Qantas a better airline.
Passengers to share on some regional routes, but not on others
Concentrating on regional rather than jet-operated mainline trunk routes, Rex has recently entered the Sydney-Coffs Harbour and Sydney-Port Macquarie routes. Coffs Harbour and Port Macquarie are small cities on the NSW coast between Sydney and Brisbane.
Qantas and Virgin Australia both flew on these routes, with Virgin Australia having now exited both routes. In the 2019 calendar year, 326,500 passengers flew on the Sydney – Coffs Harbour route, and 190,900 passengers flew on the Sydney – Port Macquarie route.
John Sharp says both those routes can easily sustain two airlines. He contrasts that with Qantas’ recent decision to start flying between Melbourne and the northern Tasmanian town of Burnie. Rex has long had that route to itself. Mr Sharp says Rex averages 862 passengers a month on the route.
“It’s hardly enough to keep one airline going,” Mr Sharp said. “It’s certainly not enough to keep two (airlines going), and Qantas is now going to compete for 862 passengers a month.”
John Sharp says Qantas’ behavior tackling routes previously left to Rex is non-rational and retaliation because Rex is now competing with Qantas on some mainline domestic routes.
“Qantas decided to move into our regional routes in a non-rational way, in ports we’ve been operating as a sole operator for many years, 20 or 30 years. And Qantas, when we announced that we were going into the domestic market, Qantas immediately started to take retaliatory action.”
Is Qantas aggressive rather than simply competitive?
When it was put to Rex’s Deputy Chairman that moving on and off routes was part and parcel of an open and competitive airline industry, Mr Sharp said this was not the case. That was because Qantas’ current regional route maneuvers are not profit-driven.
Instead, Jong Sharp says Qantas is attempting to force Rex out of longstanding markets and punishing it for daring to start competing with Boeing 737s on busy mainline routes.
It has been a busy six months at Rex. The airline is happy with how its regional and mainline domestic services are performing and the complementarities they offer each other. As for Qantas, John Sharp gives as good as he gets.
And he’s not backing down. When asked what the outcome of the pressure from Qantas would be, the Deputy Chairman said Rex would go in harder and go into more routes.