Rex accuses Qantas of predatory behaviour, withdraws from routes

[jb747]

So, Rex is pulling out of routes that QF is not going to service, but blaming QF. I suspect this has much more to do with their bigger ambitions. Small towns have no place in that particular model.

 

[themaiz]

Wouldn't it be so much better if Rex took QF headlong on profitable and bulk-traffic routes (eg: SYD/MEL), while exploiting some white space that QF has abrogated? Is that commercially realistic, or are the small-centre regional routes truly uncommercial and unprofitable?

 

[dajop]

Wouldn't it be so much better if Rex took QF headlong on profitable and bulk-traffic routes (eg: SYD/MEL), while exploiting some white space that QF has abrogated? Is that commercially realistic, or are the small-centre regional routes truly uncommercial and unprofitable?

It think these recent route reductions are more nuanced than just a blanket statement that"small-centre" routes are unprofitable. Each has some characteristics that can sort of explain why the routes might be unsustainable. Although I am looking at this from a more Victorian perspective where slightly larger centres like Shepparton and the Latrobe Valley have no air service - due to proximity to MEL, 2hrs+ away.

Lismore - The trouble would be a more frequently served, more competitive airport (BNK) is only 35km away, and OOL 100km away. Yes - Casino is further, but still only 30 mins further to the better served BNK than LSY.

Grafton - CFS, better served, is an hour way. Communities close to, but to the north of Grafton are well served by the better served BNK.

Cooma - would seem to be a more seasonal route for winter, for the rest of the year, Canberra is just 1:15 away. This route has been on again/off again over many years.

Bathurst - is bigger so less easy to understand. I guess SYD is 3 hr drive and the now more competitive OAG is 40 min drive

Kangaroo Island - has been a mainstay of Rex for years. Too much competition (QF and ferry) vs not enough demand???

 

[Mattg]

Lismore - The trouble would be a more frequently served, more competitive airport (BNK) is only 35km away, and OOL 100km away. Yes - Casino is further, but still only 30 mins further to the better served BNK than LSY.

Some major cities have airports that are more than 35km from the city they are supposed to serve - let alone neighbouring towns/cities.

MUC, CMB, NRT, DME, FRU, ICN, KUL, WDH, CNF, IKA are a few that come to mind. Admittedly, some (although not all) of these airports have high-speed rail links to the nearby city.

 

[themaiz]

Some major cities have airports that are more than 35km from the city they are supposed to serve - let alone neighbouring towns/cities.

We're definitely lucky (or well-served) in Australia in terms of quick access to significant airports. NYC has three airports, any one of which is claimed to take 20-30 minutes from the middle of Manhattan, but is more like an unpredictable 90 minutes when it's important. But I don't believe that's a fair comparison with our feeder airports. I value being able to fly from somewhere relatively close to where I am.

Occasionally I even pay for the privilege!

Google tells me that pretty much everywhere at the edge of Sydney (Richmond, Berowra, Palm Beach) is no more than 1:15 from SYD. I don't believe that for a second, but it's what Google tells me so it must be true.

 

[dajop]

Some major cities have airports that are more than 35km from the city they are supposed to serve - let alone neighbouring towns/cities.

MUC, CMB, NRT, DME, FRU, ICN, KUL, WDH, CNF, IKA are a few that come to mind. Admittedly, some (although not all) of these airports have high-speed rail links to the nearby city.

In terms of travel time - ~35 mins from centre of Lismore to BNK - there's a big proportion of Melbourne, Sydney and Brisbane (and even Gold Coast) that would, on a good day, take longer to reach their respective airports. And on a bad day well nearly all of MEL & SYD would take longer than that

 

[ANstar]

There has to be decent revenue on shorter links, and I'm all for Rex giving QF a bit of a squeeze. I'm flying to Hervey Bay in a few weeks. QF quotes $247 to go SYD/BNE/HVB. The SYD/BNE sector is selling at $140 right now, so... another $150 to go BNE/HVB? Sure. And then it's $247 to return HVB/SYD a few days later, when the stand-alone BNE/SYD sector is selling for $200, so incremental HVB/BNE is $47 that day. And I checked a non-QF booking site, and was offered $207 for the full one-way on the same planes.

I'm sort of surprised at the pricing. QFLink seems to be the only carrier doing BNE/HVB/BNE, so they could conceivably charge a motza. In fact I think the incremental fare is pretty reasonable considering the alternative is a 3.5 hour drive in a rental car. So what's the special sauce? Does Fraser Coast have a seriously active polly at work?

Jetstar are starting SYD-HVB in a couple of months so pricing should be lower and non stop too.

 

[themaiz]

Jetstar are starting SYD-HVB in a couple of months so pricing should be lower and non stop too.

Which leads to the question: would I choose a one-hop JQ over a two-hop QF? Just as well that I don't have that moral dilemma for the SYD/HVB work trip that I booked yesterday! But the need to take two 30kg suitcases would seal the deal, I think.

 

[Mattg]

The ACCC has responded to Rex's allegations, basically saying that they don't think Qantas is being anti-competitive, that competition across the broader market appears to be increasing rather than decreasing, and that the ACCC is focused on protecting competition, not individual competitors.

ACCC Rebukes Rex Allegations Against Qantas

The Australian Competition & Consumer Commission (ACCC) has responded to allegations made by Rex that Qantas is engaging in anti-competitive

www.australianfrequentflyer.com.au

 

[henrus]

The ACCC has responded to Rex's allegations, basically saying that they don't think Qantas is being anti-competitive, that competition across the broader market appears to be increasing rather than decreasing, and that the ACCC is focused on protecting competition, not individual competitors.

Interesting report...

Unpacking a few parts of the report:

They go on about REX launching flights for $49 (not mentioned in the report is that this includes easter dates), I'd argue this isn't great for airline competition in the long run as airlines like VA/QF/JQ really have to match/drop prices to near Rex levels although in the process make money elsewhere (routes not serviced by rex or single carrier regional routes).

Another interesting comment is "Loyalty schemes have the potential to reduce competition". I agree this is a problem both from a consumer point of view (loyal VA/QF flyers stick to one or the other, there are many people I know who won't even consider flying the other) but also as a major problem for REX. Unlike many other countries, we can earn frequent flyer points from the supermarket, petrol station and many other day to day purchases. To launch a successful loyalty program it'll need to be rewarding for the consumer that they actually want to switch, remembering REX likely won't have supermarket frequent flyer points from day one, and besides is Aldi or IGA the best they could get right now?

Finally, an interesting map from the report shows the locations of lounges, I guess it makes sense why more people pick Qantas:

 

[flybynight]

Their antics however seem to work more often than not (and frankly it's sad that it does).

Unsurprisingly, locally here in SA, the Opposition Party was quick to announce that the State Gov should throw Rex a handout to ensure they keep flying their twice weekly return flights to Kangaroo Island (versus the current QF 4 returns).

For SA, I wonder how long Rex will continue with Mt Gambier given the QF push on this route, and whether we'll see reductions/changes to the Pt Lincoln and Whyalla routes which QF also fly.

Rex has been gouging country people for years. I have flown the Adelaide to Kangaroo Island route for many years and on near full planes could never understand why it cost more than twice as much to do a 100km 20 minute flight than my flight from Adelaide to Melbourne. On top of that they would cancel flights with no notice if on occasions there were a low number of passengers - and then make you wait in a run down airport with no food or beverages for up to 6 hours until the next flight. The only choices were to drive back home (80km in my case), go to the nearest town and wait (15km), or throw away your ticket because they would not refund. I refer to Rex as the worlds worst airline and they have only been interested in servicing routes where there is no or very little competition. And despite their whining, Rex has been a very profitable business- for their Malaysian owners that is.

 

[AIRwin]

And despite their whining, Rex has been a very profitable business- for their Malaysian owners that is.

Malaysian or Singaporean?

 

[flybynight]

Malaysian

 

[dajop]

Malaysian

No, Singaporean (~45%) Also significant institutional shareholders (~25%). Annual report contains the information.

 

[jb747]

It's competition when Rex do it, but predation when done by QF.

I can't help but think that Rex's push into 737s was based on the premise that Virgin would not be around. I can't see this ending all that well.

 

[henrus]

I can't help but think that Rex's push into 737s was based on the premise that Virgin would not be around. I can't see this ending all that well.

You don't have to think that... the AFR has an article about it. You're 100% correct that's the case.

 

[jakeseven7]

You don't have to think that... the AFR has an article about it. You're 100% correct that's the case.

Would Rex's owners be cashed up enough to take VA2 off Bain's hands and merge the brands....

Either Rex or VA2 is going down thats for sure.... (or Rex dramatically scales back again) just a question of when....

 

[dajop]

Would Rex's owners be cashed up enough to take VA2 off Bain's hands and merge the brands....

Either Rex or VA2 is going down thats for sure.... (or Rex dramatically scales back again) just a question of when....

Or vice versa, is the whole thing a ploy to get Bain to buy out Rex and get rid of a competitor, an significantly expanding their network and be a more serious competitor to Qantas. And continuing along the theme of three dimensional chess, maybe by entering a lot of Rex's routes, QF isn't that concerned about competing with Rex (and in some routes, looking at frequency and timing they aren't) but sending a signal to Bain/VA "don't mess with us again", stay out of it....

Or we're all just overthinking this, and there may be a niche for a well run airline, with low costs, to fill the void left by Tiger. After all, when you don't need to completely establish a new brand, already have a back office, facilities at three of the major airports and can take advantage of leases at low prices, there might be a possibility of becoming profitable (should business travel recover). I am not convinced though.

 

[AIRwin]

Exactly 1 month later... Rex has had a change of their heart (in the country) announcing a restoration of the routes:

https://rex.com.au/BlobViewer/BlobViewer.aspx?attachtype=MR&filename=425959532B324D427551626B4A6455316A6F634B5A43567968635531666A584E336352755559782F4470794A4F4634425A4B6143375857736975626343326C45

What will happen next on 22 April?

 

[Carrots]

I'd be more interested in what they'll announce on April 1st...!