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In recent weeks, QantasLink has announced new regional services to Ballina, Kangaroo Island and now Orange. But Regional Express (Rex) has complained to the Australian Competition & Consumer Commission (ACCC) that QantasLink is using its dominant position to force them out of these markets.
New QantasLink flights from Adelaide to Kangaroo Island
From July, QantasLink will more than double its flights from Adelaide to Kangaroo Island from 5 return services per week to 12.
The announcement came four days after Rex announced it would withdraw from Kangaroo Island, accusing Qantas of dumping excess capacity in attempt to force them out. Rex will end flights to Kangaroo Island on 1 July, the same date that QantasLink increases its services.
New QantasLink flights from Sydney to Orange
QantasLink announced this week that it will also commence direct flights from Sydney to Orange (OAG), with the first flights taking off on 1 May 2020. QantasLink will fly to Orange daily on weekends and Tuesdays, and twice per day on Mondays, Wednesdays, Thursdays and Fridays using a mixture of 36-seat Dash 8-200s and 50-seat Dash 8 Q300 aircraft.
Rex operates between Sydney and Orange up to five times per day using Saab 340 aircraft. The regional airline therefore retains the advantage of frequency, but that hasn’t stopped it undercutting Qantas’ $129 launch fares with promo fares for $108.
You can discuss the new QantasLink routes on the Australian Frequent Flyer forum: New domestic routes
Update: The launch of QantasLink Sydney-Orange flights was delayed until 20 July 2020 due to the COVID-19 travel shutdown.
Rex withdraws from Sydney-Ballina route
Just weeks after QantasLink announced it will launch a daily flight from Sydney to Ballina, Rex has withdrawn from the route. It will operate its last flight on 29 March 2020 – the same day that QantasLink commences services with similar timings to the existing Rex flights but using a larger 50-seat aircraft.
Rex has complained to the ACCC that Qantas is abusing its market power to push it out of regional routes with marginal profitability. Rex claims, for example, that it currently fills only 56% of seats on its Sydney-Ballina flights. It says that with the addition of the new QantasLink services, its load factor would fall to 18%. (This assumes that the new flights stimulate no growth in the market.)
Rex claims that it had no choice but to withdraw from Ballina and Kangaroo Island because it “is not able to match Qantas’ financial firepower and, unlike Qantas, Rex is not able to continue servicing a money-losing route indefinitely.”
“It is obvious that the excessive additional capacity introduced by Qantas on these routes kills the ability for Rex to offer a sustainable alternative to the Qantas model for regional communities and increases Qantas’ market power,” Rex said in a statement.
“Qantas has won this round, but in the longer term the communities are the real losers,” according to Rex.
“A track record of throwing tantrums”
Qantas strongly refutes the claim that it is abusing its market power. A Qantas spokesperson told Travel Weekly that Rex has “a track record for throwing tantrums when things aren’t going according to their plan”.
“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”, Qantas said.
QantasLink has announced a slew of regional routes in recent months – and there could be more to come – as it receives five Dash 8 Q300 aircraft back from Jetstar in New Zealand.
Rex’s complaints are similar to those of Strategic Airlines (which later became the now-defunct Air Australia) against Qantas in 2011. Strategic Airlines complained at the time to the ACCC that Qantas was abusing its market power by dumping excess capacity and engaging in “predatory pricing” on the Brisbane-Gladstone route. In response to Strategic launching flights to Gladstone, Qantas added flights and slashed fares to $59 one-way. Strategic withdrew from the route several months later, citing “aggressive competitor activity”.
Join the discussion on the Australian Frequent Flyer forum: Rexit because QF wrecks it?
