This year marks the 20th anniversary of the collapse of Ansett. Remember Ansett? Of course you do. In some ways, the airline has never left us – or, at least, its legacy never has. In conversations about the business of aviation, Ansett is still often referenced as an example of why Australian airlines are all ultimately doomed to fail unless they’re called Qantas. (It often goes hand in hand with the joke about how the best way to become a millionaire is to be a billionaire who buys an airline.)
The topic came up again this week when Rex launched its first flight between Sydney and Melbourne on Monday, marking its move into the territory that’s been dominated by the industry’s most recent duopoly, Qantas and Virgin Australia (and their subsidiaries, Jetstar and the recently departed Tigerair). In the coming weeks, Rex will launch more routes – between Melbourne and Adelaide, Melbourne and the Gold Coast, and Sydney and the Gold Coast. And it’s got its eyes on further expansion, possibly connecting Canberra and Brisbane to other capital cities.
All these new routes come with remarkably cheap seats as part of an initial promotional campaign. A few weeks ago, in this column, I described the discounts the major airlines were offering as a ‘price battle’, rather than a war. Well, since then, the troops have been deployed and the trenches have been dug. The war is starting, although price is just one of the battlefields. The more interesting arena to watch is the flight routes.
While Rex has been busy moving into the capital city routes dominated by Qantas, Jetstar, and Virgin Australia, Qantas has been moving into Rex’s territory, launching new regional flights during the pandemic to places like Griffith, Orange, Mount Gambier, and Merimbula.
Rex didn’t appear to take the news well, with the airline’s deputy chairman, John Sharp, saying last month, “Qantas has clearly embarked on a deliberate strategy of moving into Rex’s routes that can only support one regional carrier in an attempt to intimidate and damage Rex in its traditional regional market”. They’re fighting words from Rex, although QantasLink CEO, John Gissing, dismissed them as “a classic Rex tantrum”.
Putting the corporate battle aside for now, it’s worth considering whether customers are likely to embrace these new options, or whether profitability for all the airlines is just a flight of fancy. Because, with the Federal Government’s official announcement that Australia’s borders will be closed until at least 17 June (with no audible gasps of shock to be heard), there are certainly a lot of opportunities in the domestic market.
When I speak to the travel industry in Australia, they consistently tell me that the biggest increases in tourism have been in regions that are within about three hours’ drive of capital cities. People want to do domestic holidays, but they can’t necessarily get away for a whole week, or they just don’t like the idea of those long drives where you arrive at your destination exhausted, wishing you’d left the kids on the roadside.
Recently, when I flew to Port Macquarie for a quick trip, I left my home at about 7am and was at the hotel by 9am, still refreshed and ready for a full day of exploring. This is the kind of experience Australians are going to embrace even more this year and I suspect Qantas using its large marketing budget to push regional flights will actually benefit all the operators, including Rex.
Looking at it from a different perspective, Rex’s new routes between the major cities might be a very popular way for people in regional areas to get to other states. For those who only have access to Rex flights, it can be quite annoying to have to fly to Sydney and then change onto another airline to get to Melbourne, for example. It’s not just transiting terminals and checking in a bag again, it’s also the uncertainty about what happens with the connecting flight if the first one is delayed.
Of course, all this is happening against the backdrop of big changes at Virgin Australia, and it’ll be interesting to see how all the airlines will fit together. Virgin last week unveiled its new lounge at Adelaide Airport, with a modern yet earthy feel and wine tastings from local South Australian producers. There’s also an area known as The Library which has desks with power points and lamps, trying to keep business travellers happy. The fresh look is due to be rolled out to other lounges across the network.
The assumption used to be that the Australian skies could only support a duopoly and a challenger would mean one airline would ultimately be grounded. But the number of people flying domestically has increased over the years (pre-pandemic), and travellers are not as easy to categorise as they once were – it’s not just cheap leisure or expensive business.
We may still think of Ansett when we talk about the prospects of an airline’s survival, but let’s not forget that Rex was born right after Ansett’s collapse from two of its profitable subsidiaries – Hazelton Airlines and Kendell Airlines – and Rex is now flying its capital city routes with Boeing 737s that were used by Virgin until just recently. In Australia’s aviation industry, new things are always taking off.
