REX taking it to the big boys on lucrative capital city routes

Regional Express (REX), was facing shutdown after the COVID-19 pandemic hit. Only weeks later, the Australian domestic carrier has announced it is taking on the Qantas Group and Virgin Australia with the launch of competing flights on the lucrative “Golden Triangle” of Melbourne, Sydney and Brisbane. Associate editor and chief correspondent, Tom Ballantyne, reports.

July 1st 2020

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It was not exactly a major network announcement. But as the Qantas Group was ramping up domestic flights last month it put out a brief statement that announced it had commenced flying to Byron Bay on the New South Wales north coast. Read More » And from July 20, it declared, it would be launching a service from Sydney to the regional centre of Orange in the state’s mid-west.

“After years of locals calling for the flying kangaroo to fly to Orange, the iconic red tail will touch down there for the first time in a few weeks,” CEO of Qantas regional arm QantasLink, John Gissing said. “We are bringing much needed competition to the route, which has been a monopoly for many years. These flights to Orange will make it easier for Sydney residents to discover one of NSW’s most beautiful regions and its world-class restaurants and wineries.”

The monopoly to which Gissing refers comes in the form of Regional Express or REX, the world’s largest operator of Saab 340 turboprops. Fifty seven of the sturdy aircraft fly to regional destinations in New South Wales, South Australia, Victoria, Queensland, Tasmania and Western Australia.

There is good reason why Qantas wants to play in REX’s backyard. Sydney-based REX has decided to invade Qantas’ patch, planning a March 2021 launch, with up to 10 jets, on the golden triangle of Australian trunk routes between Sydney, Melbourne and Brisbane. In effect, it aims to capture some of the lucrative market dominated by Qantas, Jetstar and Virgin Australia.

REX’s deputy chairman, John Sharp, said the airline has the infrastructure at the three major cities. “It will simply be an incremental expansion for REX to embark on domestic [between capital city] operations.” He added the flights would be a “hybrid model”, offering affordable air fares that will include baggage, meals, pre-assigned seating and airport lounges.

The announcement of the bold strategy surprised the industry given REX had warned in March it was about to cease flying because of the COVID-19 crisis. Soon after, it became the beneficiary of some US$206 million in Australian government aid aimed at helping regional airlines survive. Additionally, it will receive a second allocation of funds from a broader $495 million airline relief package.

REX plans to lease five to 10 narrow-body jets, either A320s or 737s. It also is evaluating the modernization of its somewhat aged turboprop fleet. In June, it signed a Memorandum of Understanding with European turboprop manufacturer, ATR, to cooperate in studying optimized solutions for the replacement and modernization of its fleet.

The agreement has the potential for REX to complement and expand its existing broad domestic route network with a mix of ATR 42s and 72-600s. The airline and air framer also intend to explore financing and training options, in particular flight crew ab-initio training.

All in all, with Virgin Australia expected to be back in the air after negotiating its way through receivership, Australia’s major city trunk routes could become rather crowded. When the pandemic passes, there also is potential for REX, given it succeeds with its initial jet foray, to expand to other destinations.

It certainly has the backing to grow. The majority of its shares are held by a group of Singaporean businessmen, led by Kim Hai Lim, an industrialist and the airline’s executive chairman. Other major investors are Lee Thian Soo, who has extensive international business experience and is the chairman and owner of a company supplying specialty medical devices, systems and drugs to healthcare institutions in ASEAN, and Joe Tiau Tjoa, the managing director of Singaporean wholesaler Greatland.