Rex troubles signal bigger issues

Running an airline is a tough business in Australia, with consumers left to pay high prices due to a lack of proper competition. Rex Airlines is the latest to find out how difficult it is to break into the lucrative major city routes. Rex sought to exploit the demise of Virgin Australia during the pandemic but things have obviously not worked out as planned. The full facts are yet to be made public but it appears that difficulties for Rex in its post-Covid expansion plans have included tensions between the company’s majority shareholder and former executive chairman, Lim Kim Hai, and the board.

For many regional centres, Rex Airlines is more than a plucky competitor against Qantas and Virgin in Sydney, Melbourne and Brisbane. It is the only game in town. The airline was established in the wake of the Ansett collapse in 2002. Using a fleet of 34-seat Saab 340s, Rex provides crucial connections to 50 centres, including Carnarvon and Albany in Western Australia, Coober Pedy and Ceduna in South Australia, Broken Hill and Parkes in NSW, and Birdsville and Bedourie in Queensland. Local governments in these centres are anxiously waiting to see how things can be resolved.

Anthony Albanese has rightly said Rex is an important regional airline that already receives substantial government support. He said the federal government’s interest was in keeping it flying to areas that were not serviced by other airlines. The Prime Minister noted that Rex had moved away from its traditional role of being a regional airline. Transport Minister Catherine King said the government would do what was in the public interest to support regional aviation and maintain regional connectivity.

This is all well and good. But there is also a need to investigate why Rex has found it so difficult to break into the major city routes market. Aviation history is littered with failed attempts to take on the market dominance of existing players, which have managed to expand their footprint and influence through gate allocations at the major airports.

The failure of Bonza to gain a foothold in the domestic aviation market and the difficulties experienced by Rex to break out of its regional-only model are worrying developments for domestic travellers.

Competition is the key to cheaper airfares for the flying public. Government subsidies are not the answer but Ms King must do all she can to ensure that barriers to entry are not so high that passengers are stuck only with the services and prices that suit the incumbents.