Increased Competition and High Prices: An unfavourable condition for Australia’s Rex Airline

A Rex Airlines Boeing 737 lands at Canberra.
Photo Credit: Robert Myers CC BY-SA 3.0 via Wikimedia Commons

LONDON – Rex Airlines has announced it will cease the  Sydney-Canberra route just after one year after its launch. The airline accuses the country’s national carrier of “fare gouging” on the highly competitive route.  This is in tandem with the airline’s ongoing review of its regional network. 

Competitors hit Rex’s Routes

The suspension of the Sydney-Canberra service is justified because of the entrance of an additional airline, Link Airways, Qantas’s regional arm,  along with high charges imposed by Sydney Airport from 1st June. Virgin Australia also reintroduced the service between Sydney and Canberra in January, with up to 11 flights on weekdays, ramping up the further competition. This means that the route is no longer economically viable for the regional airlines. 

John Sharp the airline’s deputy chairman stated that: “Unfortunately with the entrance of an additional operator and the very high charges imposed by Sydney Airport from June 1 means that the route is no longer viable for Rex.”

He, later on, added: “The resources will be diverted to other routes which will provide a better return.”

“Sydney Airport made a number of attempts to support Rex’s operations on the Sydney-Canberra route, and we were making good progress on coming to an agreement,” 

The airline actually directed the blame towards the airport for imposing high charges, and not the competitor itself. “Rex’s suggestion that Sydney Airport is partially responsible for them exiting the route is disappointing and inaccurate.”

Rising Costs Hurt Rex

This is a huge disappointment for the airline as Canberra is considered a lucrative and high yield destination. Rex could have made an easy profit for the route but is being hampered by Sydney Airport’s high prices. Low-cost carrier  Jetstar has two new routes to its Canberra service with direct flights to and from both Melbourne and the Gold Coast. This proves that flying into the Australian capital is perfectly economical.  

Apart from the cancellation of the Sydney-Canberra route, the airline is pulling its plug on the Albury-Melbourne route effective 29 August. To a greater extent, the route reviewing from the management team at Rex is questioning more routes. A quick search on the airlines booking platform shows that many routes are unavailable for booking after 30th June, such as Sydney to Cooma, Lismore, Grafton and Bathurst, as well as Adelaide to Kangaroo Island.

This is not a surprising move as this coincides with the end of the Federal Government-funded Regional Airline Network Support Program. The Regional Airline Network Support Program provides government subsidies to certain routes serving regional and remote locations. Without these subsidy programs, the airline is unable to fly underserved routes. 

Increased competition may not be the main factor of Rex’s route closure (Sydney-Canberra) but the high prices imposed by Sydney’s Airport. Rex Airline always welcomes competition,  as John Sharp said: “We are proud to have brought much-needed competition to the Sydney-Canberra route and airfares have never been cheaper.”

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