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8 July, 2020

Qantas hits back at allegations of “predatory behaviour” with Sydney-Orange route

Adelaide, Australia - December 23, 2015: QantasLink De Havilland Canada Dash 8 regional airliner aircraft taking off from Adelaide International Airport.

Qantas has responded to a call by Regional Express (Rex) for the federal government to review the national carrier’s coronavirus funding, as it prepares to commence services between Sydney and Orange.

Rex has accused Qantas of “anti-competitive” and “predatory” behaviour over its planned 20 July entry onto the Sydney-to-Orange route which, at the moment, is solely served with direct flights by Rex.

“Orange currently averages a total of 40 passengers per week and barely fills up 30 per cent of Rex’s twice-weekly return flights,” Rex said in a statement.

“Qantas intends to flood the market with another 216 seats a week making it an aggregate load factor of 11 per cent for the two carriers.”

Prior to the coronavirus pandemic, Orange had only 66,000 annual passengers and Rex registered a 66 per cent load factor on this route, the regional carrier said.

Even if passenger numbers were to return to pre-COVID levels in the next 12 to 18 months, it said, Qantas’ entry would see a minimum of an additional 60,000 seats on this market, making the overall load factor for both carriers to be only 41 per cent.

Rex said this was “clearly” commercially unsustainable.

“In contrast, QantasLink is not even re-commencing services on some routes like Sydney-Wellcamp, where Commonwealth funding is available from 1 July 20 to fully underwrite two return services per week,” Rex said.

“QantasLink’s services to Orange, on the other hand, do not qualify for Commonwealth funding.

“It is obvious that Qantas’ action is not competition on its merits, but rather predatory behaviour aimed at weakening Rex at a time when all airlines, including Qantas, are sustaining operational losses, hoping that if Rex collapses it will have the regional aviation market to itself.”

Rex has called on Canberra to review Qantas’ funding from the Australian Airline Financial Relief Package, the Domestic Aviation Network Support package and the COVID-19 Regional Airline Network Support (RANS) Program.

Rex “clearly uncomfortable” about facing competition on monopoly route, says Qantas

Orange’s local community has, however, been extremely supportive of QantasLink’s entry to the route, according to a Qantas spokesperson, who said the service would “create more competitive airfares”, and “stimulate more demand for people to visit the region”.

“Rex is clearly uncomfortable about facing competition and seeing their monopoly on flights to Orange coming to end,” the spokesperson told Travel Weekly.

“Rex sees their plans to expand into domestic routes as good for competition, but when a route they have had a monopoly on for decades faces some competition, they say it’s predatory behaviour.

“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.”

The tit for tat between Qantas and Rex comes just weeks after the Australian Competition & Consumer Commission (ACCC) revealed it had been directed by Treasurer Josh Frydenberg to monitor Australia’s air travel market over the next three years.

The corporate watchdog said it would be applying a particular focus on early signs of damage to competition, which could harm the long-term interests of consumers.

At the time, a Qantas spokeswoman told Travel Weekly that the group’s return to flying would be good news for consumers.

Meanwhile, Rex has announced it has received term sheets from three different lessors, all interested in the sale and lease-back of about 15 aircraft from the carrier’s fleet of 60 unencumbered SAAB 340 aircraft for $30 million.

Rex is set to commence domestic jet operations if it is successful in raising at least $30 million to fund the start-up of its city operations, with the airline accelerating its preparations for the start of services targeted for 1 March 2021.

Featured image source: iStock/Ryan Fletcher

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accc Josh Frydenberg qantas regional express rex Sydney to Orange