“Money-losing predatory actions”: Rex slams Qantas for muscling in on regional routes

Regional Express (Rex) is calling for the competition watchdog to reopen an investigation into allegations Qantas acted “anti-competitively”, which the embattled airline slammed as the latest in a series of “increasingly absurd” claims from the regional carrier.

Rex is Australia’s largest independent regional and domestic airline, with a fleet of 61 Saab 340s and six Boeing 737s flying to 58 locations across all states and territories.

It alleged Qantas was acting anti-competitively after the national carrier launched more than 50 new domestic and regional routes over the past two years, 10 of which are also serviced by Rex.

But earlier this year, the Australian Competition and Consumer Commission (ACCC) advised Qantas it would take no further action following an investigation.

Rex wasn’t convinced, however, releasing a strongly-worded statement this week saying Qantas’s “money-losing predatory actions using taxpayers’ money … end up destroying the lifeline of so many regional towns and cities”.

It came after Qantas’s recent decision to suspend the Melbourne to Wagga route, which Rex claimed “clearly demonstrate Qantas’s true intentions when it entered into these and other uneconomical regional routes to compete with Rex”.

The statement continues that Rex warned the public and regulators back in December 2020 about “grave concerns that Qantas is embarking on an opportunistic strategy of flooding the regional airline market with additional excess capacity to eliminate weaker regional competitors”.

“Qantas now realises that its massive losses compounded by startling operational incompetence make it no longer sustainable to continue bleeding cash on these marginal regional routes,” the strongly worded statement said.

But a Qantas spokesperson retorted that “Rex’s claims are getting increasingly absurd” and pointed out that the ACCC has already investigated and ultimately declined to take action on the allegations.

“We’ve always said we’d only operate on routes that were commercially viable or that had genuine growth potential, which is exactly what we’re doing,” the Qantas spokesperson told SmartCompany.

The national carrier also pointed the finger back at Rex, saying it was guilty of the very thing it was accusing Qantas of doing.

“Rex is the airline that recently stopped flying eight routes and left three regional towns without any air services at all, telling those communities it was choosing ‘to look after itself’ and despite a tagline that its ‘heart is in the country’,” the spokesperson continued.

“Rex needs to stop blaming others and take responsibility for their decisions to exit so many regional routes.”

Price battle

It comes after Rex recently announced it would add Brisbane to its network by mid-December, meaning it will be operating on Australia’s top five busiest routes connecting Sydney, Melbourne, Brisbane, Adelaide and the Gold Coast.

These routes carried over 22 million passengers per year pre-COVID-19, which is over one-third of all Australian domestic passengers annually, the ACCC says.

“Rex’s further expansion is welcome news for the millions of travellers who will soon have a choice of Qantas, Jetstar, Virgin or Rex on Australia’s five busiest routes,” then-ACCC chair Rod Sims said.

But in response to the announcement, Virgin, Jetstar and Qantas all reduced their cheapest available fares on certain flights to compete with Rex.

On Brisbane-Sydney, Virgin matched Rex’s $69 fare and Jetstar undercut Rex with sale fares at $55. Similarly, on Brisbane–Melbourne, Virgin matched Rex at $79 and Jetstar undercut Rex with sale fares at $65.

Qantas also lowered its airfares on both prospective routes. Rex says that the national carrier pulling out of Melbourne to Wagga was “punishment” for the regional carrier’s citylink expansion.

“Rex predicts that the two recent exits will be followed by more exits from other marginal routes that Qantas entered purely with the intention of destabilising Rex in its traditional regional market as a punishment for entering the domestic market.”

Last month, Qantas CEO Alan Joyce announced the national carrier would cut another 5% of domestic flights in July and August on top of a 10% announced in May.

Joyce said cutting the flight capacity down would ease the pressure on the operation as it battled multiple PR crises from several angles amid an uptick in international travel and staff shortages.

“You cut back on the capacity, you fill more of the seats, that’s more efficient, and airfares go up. That’s the reality,” he said.

“Taking the 10% down eases the pressure on the operation and helps get a smoother operation in, because we still have the pilots, the cabin crew, we still have the airport staff to actually meet that schedule.”