SA councils reject Regional Express airline deal

Regional Express flights across South Australia could be shutdown immediately after councils said they could not agree to the terms REX says it needs to keep flying.

• Councils says they won’t be extorted by REX
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REX’s regional flights across South Australia could be shelved immediately, with the state’s regional councils saying they are not in a position to agree to the terms the airline was seeking to keep it afloat.

In an open letter to councils, Rex Airlines wanted councils to enter long-term operating agreements to help keep the airline viable.

It expected extraordinary council meetings to consider and approve the proposal within days or all services will cease.

District Council of Lower Eyre Peninsula operates SA’s busiest regional airport at Port Lincoln, which draws in more than 170,000 passengers every year.

Traditionally, Rex used to operate seven daily flights to Port Lincoln, but the number is now down to one a week. But chief executive Rod Pearson said the council was not in a position to agree to Rex’s terms, which would have cut the passenger levies it collects from the airline by about half.

“The deal being presented would have meant insufficient revenue recovery for council to effectively manage its airport,” he said.

“It would have been insufficient to service existing debt and to undertake essential capital work.”

Mr Pearson said council was willing to offer support to Rex but not a multi-year deal like the airline was after.

“We have two airlines servicing Port Lincoln – Rex and QantasLink – and we treat them equally, so from April to June we’ve offered to waive their passenger levies,” he said.

“We’ve also offered them the opportunity to accrue debt to council, to be repaid from October, to assist with their cashflow.”

Mr Pearson was hopeful this support, along with Federal Government help, would help keep Rex flying to Port Lincoln.

“A flight from Adelaide to Port Lincoln is 35 minutes, rather than a seven-hour drive, so we really do value the services provided by Rex,” he said.

“We understand the health pandemic is having a massive impact and we are prepared to support them with some measures. But we just can’t operate with 50 per cent less of the budgeted revenue.”

Mr Pearson also said the five-year deal, with a three-year right of renewal, sought by Rex was “unrealistic”.

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Kangaroo Island Mayor Michael Pengilly said the council met yesterday morning and also agreed it was not prepared to enter into the new contract proposed by Rex.

“We also think it’s not appropriate to have only four days to make a decision,” he said.

Whyalla Mayor Clare McLaughlin said while council was prepared to support Rex through fee waivers in the coming months, it could not agree to the airline’s terms.

Grant District Council, which runs the Mount Gambier airport, which is undergoing a multimillion-dollar upgrade, held its meeting on Rex in confidence.

Local Government Association president Sam Telfer said while the revenue losses being proposed by Rex varied according to the different regional councils, he said they were “significant”.

“We can’t lose this service but we also can’t undermine regional airport businesses to a level where they’re no longer sustainable,” he said.

Rex was contacted for comment.