Qantas extends regional routes to ‘force out smaller operators and drive up airfares’

Rex has blamed Qantas for its decision to pull out of Sydney-Ballina and Adelaide-Kangaroo Island routes.

Byron Bay is in high demand and Qantas flights to nearby Ballina start in March.

Qantas has hit back at accusations it’s trying to squeeze smaller operators off key regional routes by dumping capacity and making them unprofitable.

An official complaint raised by Regional Express (Rex) with the Australian Competition and Consumer Commission cited Qantas’s behaviour in three regional routes that go beyond “competition on merit”.

“The direct impact of this conduct is to force out the smaller competitor and substantially lessen competition in the long term,” said a statement from Rex.

The three routes in question include Adelaide-Whyalla, Adelaide-Kangaroo Island and Sydney-Ballina.

The statement said the excess capacity had left the Rex board with no choice but to withdraw from Kangaroo Island and Ballina.

But a Qantas spokesman said Rex “had a track record of throwing tantrums when things were not going according to their plan”.

“Not long ago they blamed us for the fact their pilots were applying for jobs with Qantas,” said the spokesman.

“Now it’s because we’ve added services and given regional consumers more choice.”

Qantas has serviced Adelaide-Whyalla since 2015 increasing total capacity to 166,000 seats a year.

Rex said that had reduced load factors for both carriers to 43 per cent “which made the service uneconomical for both carriers”.

On Kangaroo Island, Rex said the start of Qantas flights in December 2017 boosted capacity to 24,700 seats despite demand from just 13,000 passengers.

“In addition Qantas commenced direct services to Melbourne, further diluting the passengers travelling on Rex since they no longer need to travel to Adelaide to fly to Melbourne,” said Rex.

Qantas flights to Ballina starting on March 29 would target the only service Rex operated from the town, leaving early in the morning and returning late evening.

“This service currently has 10,000 annual passengers with Rex providing a total of 18,000 seats,” said the statement.

“The addition of 36,000 annual seats from QantasLink would mean the load factor fell to 19 per cent.”

The regional operator said it had to face up to reality it was unable to match Qantas’ financial firepower and could not continue to service a money-losing route indefinitely.

“The Rex Board has decided that in light of the sharp downturn experienced in the last six months and the poor economic outlook for the next 12 months, Rex will be exiting the Sydney-Ballina and Adelaide-Kangaroo Island routes in coming weeks,” the statement said.

“This is not a decision that Rex has taken lightly having serviced Kangaroo Island continuously for 30-years and Ballina for 24-years, first as Kendall Airlines and then as Rex since 2002.”

The Qantas spokesman said it was a sad state of affairs to be blaming the larger operator for Rex’s decision to exit Kangaroo Island after devastating bushfires.

“We have a long history of serving regional Australia and we’ll continue to invest in communities where there’s sustainable demand for our services,” he said.

Rex said their only recourse was to “appeal to the ACCC to stop this anti-competitive conduct now that the ACCC has an effects test in section 46 that can be enforced”.

“Qantas has won this round but in the longer term the communities are the real losers,” Rex warned.

The ACCC confirmed it had received correspondence from Rex and was making an “initial assessment”.