Australia Regional Express begins Sydney-Melbourne flights amid 'perfect' pandemic opportunity
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A new airline is trying to muscle in on Australia's ultra-competitive Sydney-to-Melbourne route, but its prospects of cracking the market open depends on who you talk to.
Regional Express, also known as Rex, launched direct flights between Australia's two biggest cities on Monday, creating competition for Qantas and Virgin Australia.
Rex is the first independent airline to have a crack at the route in 15 years, and also plans to begin flying from Sydney and Melbourne to the Gold Coast, and Adelaide to Melbourne, in the coming weeks.
While the COVID-19 pandemic has devastated global aviation, former Qantas chief economist Tony Webber said it had also created a "perfect opportunity" for a new domestic player in Australia.
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"I think it's the perfect time for them to come into the market because Qantas is weakened, Virgin is weakened, and Rex has been highly profitable for many, many years," he said.
In announcing the route in December, Rex's Deputy Chairman John Sharp said the carrier would be moving in on the middle ground of domestic airfares.
"This is an exciting opportunity for travellers. For the first time they don't have to choose between low fares with minimal service and premium pricing for more reliable flights," Mr Sharp said.
But, history suggests Australia cannot sustain a third independent domestic carrier.
Dr Webber pointed to several failed ventures in the past, like Compass Airlines, which went bust in 1993, and Newcastle-based Impulse Airlines, which was acquired by Qantas in 2001.
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While Rex is an established player on regional routes, Dr Webber — who is now a senior lecturer at the University of NSW's School of Aviation — warned their new markets would be more hostile.
"They haven't experienced a competitor like Qantas, and to a lesser extent Virgin — Qantas is a very, very aggressive competitor," Dr Webber said.
Qantas and Virgin Australia's business has plummeted throughout the pandemic, as multiple states closed their borders and some governments also introduced regional travel restrictions.
Qantas posted, while , and shut down its budget arm Tigerair.
"Tiger has exited the market, so there's one less player ... Tiger had around 7 per cent of the market, and Rex moving into the Sydney-Melbourne is more or less just replacing what Tiger was," Dr Webber said.
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In January, Qantas chief executive Alan Joyce said he believed the industry was only big enough for two players.
"My personal view is that this market has never sustained three airline groups and it probably won't into the future," Mr Joyce told an online event.
"You can be guaranteed that Qantas will be one of them."
When asked about Rex's launch, a spokesperson for Virgin Australia told the ABC they were confident in their position as a "mid-market" carrier serving travellers, small and medium-sized business and corporates.
"Our renewed sense of purpose in who we are as a mid-market carrier, alongside the changes we've made to reduce our cost base will put us in good stead to respond to the increasingly competitive market conditions."
The spokesperson added that Australian travellers will emerge from the COVID-19 pandemic wanting better value for money.
"They will be hungry for flexibility and choice, a trusted brand, premium features and great prices which we stand ready to deliver on," the spokesperson said.
Rex purchased three Boeing 737 jets in preparation for its Sydney-Melbourne launch and plans to purchase at least about seven more by the end of this year.
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The regional airline will begin with nine return services a day between Sydney and Melbourne, launching the route with a $49 flight special which Virgin Australia matched within a matter of hours.
The ambitious new metropolitan route will see Rex join Qantas and Virgin Australia in flying one of the busiest flight paths in the world.
Qantas offers 22 flights per day between Sydney and Melbourne, while its budget arm Jetstar (15 flights) and competitor Virgin Australia (14 flights) are also regulars on the route.
Dr Webber said more than half the route's patronage was for business and that it was crucial Rex capture that market by investing in its pre-flying experience (like airport lounges) and forming a reputation for punctuality.
It comes as Qantas launched "mystery flights" on Wednesday, where a ticket-holder can board a flight with an unknown destination in Australia.
Mystery-flight travellers will find themselves roughly two hours from the departure airports in Sydney, Brisbane and Melbourne, on three flights in March, April and May.
Rex was contacted for comment.
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