Rex Airlines: Another airline has collapsed ... we should be very worried

The impending demise of Rex Airlines is a sign of a much bigger problem.

Another day, another airline has fallen - metaphorically at least - out of the skies.

On Wednesday, Rex Airlines announced that it had entered voluntary administration, and grounded its domestic fleet of 737 Boeing aircraft. 

Three hundred and fifty workers have been immediately stood down from the airline, and they are unlikely to receive any owed wages any time soon. The airline is expected to cease all operations by the end of the day.

Three hundred and fifty workers have been immediately stood down from the airline.

The Rex collapse comes just three months after newcomer regional air specialist Bonza also announced that it would cease operations. 

The immediate effects are bad enough: chaos for passengers whose flights have been cancelled, devastation for employees who find themselves out of work in a bleak job market. Longer term, we can expect higher airline prices for travellers and negative - perhaps ruinous - knock-on effects for regional centres who rely on visitors for their tourism economy.

Both Qantas and Virgin released statements after the announcement offering to rebook stranded Rex passengers onto their services, and encouraging Rex staff to apply for roles at their organisations.

But there’s a hollowness to those offers, as the virtual duopoly of Qantas and Virgin in the Australian domestic airline market is a large part of the problem. It’s like a pair of lions taking down a gazelle at the watering hole and then offering to give the flesh-stripped bones a nice burial. Of course they’re ready to pick up the pieces. They wanted the whole thing torn apart in the first place.

Bonza launched with much fanfare and travellers raved about the flight experience, but unfortunately it didn't last.

On the surface, it might look like the collapse of Rex and Bonza and the near total airspace control of their powerful rivals Qantas and Virgin is a standalone issue with the airline industry. But according to Tim Wu, Professor of Law at Columbia University we are living in a time of excessive consolidation of corporate entities across far too many industries, which could lead to far greater problems than just airline dominance. 

“We have seen so many industries consolidate into just the ‘big three’ or ‘big four,’” Wu said in a speech in 2022.  In a recent interview on the podcast Freakonomics, he argued that this consolidation - which gives enormous buying power and market control to corporations - siphons economic prosperity away from ordinary people and into the hands of the few. And that can have devastating social consequences, even leading to the rise of populist ‘strongmen’ who claim to be able to put economic power back in the hands of the people, but at a grave cost to democracy and freedoms. 

“The real road to serfdom often goes through unmanaged aggregations of private power,” he said. “[That] tends to create a lot of widespread anger.” And when moderate lawmakers fail to do their job protecting ordinary workers from the predatory practices of big corporations, that anger can lead to a complete social unravelling.

The virtual duopoly of Qantas and Virgin in the Australian domestic airline market is a large part of the problem.

Following the Rex collapse, Sydney Airport released a statement saying that they hoped the Federal Government would take this as a sign that more needs to be done to support competition in the airline industry. 

“What this situation demonstrates is that we need to change some things in the Australian aviation market for competition to thrive, because recent history suggests the barriers are too high,” Sydney Airport CEO Scott Charlton said. He says he hopes the government’s upcoming Aviation White Paper, due to be released “mid 2024” (considering we’re in late July, the clock’s ticking on that promise), will go some way to addressing these concerns. 

Catherine King MP, Minister for Infrastructure, Transport, Regional Development and Local Government, told ABC Radio today that she wanted to “ensure there is a long term solution to the security of regional aviation, and we will take our time to work our way through that” and added that she is “just about to announce” the White Paper.

But how much more talk and papers and studies and ‘working our way through that’ can Australians handle? David Mansfied, Managing Director of Ascott Limited Australasia, who owns Quest Apartment Hotels - 45 per cent of which are found in regional areas - says regional communities are tired of talk. “This is another blow. To now have - potentially - another airline falter is really concerning for regional small businesses and their communities.” he said. “I've got some very concerned mum-and-dad small business owners worried about how they're going to make ends meet.”

Following the Rex collapse, Sydney Airport released a statement saying that they hoped the Federal Government would take this as a sign that more needs to be done to support competition in the airline industry.

The minister’s protestations sound like more excuses, Mansfield says. “It just sounds like a stalling tactic to be honest. It’s action that’s needed. You can’t wait for  a white paper to be developed, then consult with everyone and then nothing gets done. Meanwhile communities are suffering because there’s no real improvement, no real change.

“It’s just more rhetoric.”

Whatever encouraging noises the Minister makes in the short term, no white paper or think tank or consultation process is likely to get Rex or Bonza back into the air. It all seems like far too little too late. And no mainstream politician seems to be offering real solutions to the growing issue of predatory corporate consolidation in industries beyond the aviation sector, a creeping problem that is coming for all of us. 

Planes might be falling from our skies, and it’s not hyperbole to see that the sky is falling along with them. Something drastic needs to change, fast.

Originally published as Rex Airlines: Another airline has collapsed ... we should be very worried