Consumer watchdog lets Qantas and Virgin know it is watching in wake of Bonza, Rex collapses

Bonza’s collapse and Rex’s uncertain future has left a gap for consumers and given more power back to Qantas and Virgin airlines.

The ACCC has fired a warning shot to Qantas and Virgin, saying it has a close eye on prices after Bonza’s collapse and Rex’s uncertain future.

When Rex started flying between the capital cities in 2021, prices on those routes dropped 25 per cent.

The consumer watchdog has reaffirmed its close watch on Qantas and Virgin in a Domestic Airline Competition report, released on Thursday, in the wake of Rex entering voluntary administration and cancelling its city-to-city routes.

Australian consumers have less choice when booking airfares now. Picture: NewsWire / Gaye Gerard

Before administrators were called in, Rex raised issue with the way slots for peak times at Sydney airport were distributed, contending more spots at busy times would help the airline compete.

The latest ACCC report finds some merit in Rex’s position.

“Improved access to slots at Sydney airport may have assisted Rex in building up its intercity operations,” it says.

Australian Competition and Consumer Commission chair Gina Cass-Gottlieb. The ACCC is watching airfare prices closely. Picture: NewsWire / Christian Gilles

“However, Rex going into administration also reflects the broader challenges of expanding an airline beyond the slot scheme.”

Rex had too few planes, pilots and staff to make full use of any additional slots, the report found.

But the ACCC makes clear the effect of more competition, and the gap Rex’s uncertain future creates.

In late June, Rex decided to compete with Qantas and Virgin, flying between Perth and Melbourne. Prices fell 25 per cent compared with July 2023, and as a promotion Rex ran a $99 Melbourne to Perth, one-way deal. Less than an hour after the Rex deal went live, Virgin beat it, offering an even lower sale price.

Rex went into voluntary administration in July, cancelling city-to-city routes. Picture: NewsWire / Jeremy Piper

But on July 30, Rex went into voluntary administration, cancelling flights between the major cities, though regional routes are still flying. Qantas and Virgin have offered to accommodate passengers with defunct Rex tickets without charging any additional fees.

Last week, the federal government announced it would reimburse Rex ticket holders if they could not get a replacement seat with Qantas, Qantas-owned Jetstar or Virgin, and if Rex could not pay the refund.

With Bonza and Rex in administration, now consumers only have the choice of two airline groups – Qantas/Jetstar versus Virgin.

Virgin had the means to immediately outprice Rex on a $99 Melbourne-to-Perth deal in July. Picture: NewsWire / Nicholas Eagar

“In recent years the expansion of Rex and the launch of Bonza meant that a sizeable proportion of passengers flying on Australian domestic routes benefited from competition between at least three competing airline groups,” it says in the ACCC report.

Rex administrators officially began a sales period on August 9, saying several private investors were interested.

Jet fuel prices have been steadily decreasing with a drop in global oil prices, though Airservices Australia wants to increase its prices for flight navigation, air traffic control and aviation rescue and firefighting services by six per cent. Picture: NewsWire / Nicholas Eagar

Documents filed in the Federal Court on Wednesday show the administrators are requesting the convening period be extended to November 25 to give them more time to finalise the sales process for the airline, which is $500m in debt, the ABC reports.

Bonza’s 323 employees had been stood down since April. No formal offers to buy the airline were made by the June deadline, and the administrators held a company-wide meeting telling all staff they had been terminated and all future flights were cancelled.

Originally published as Consumer watchdog lets Qantas and Virgin know it is watching in wake of Bonza, Rex collapses