Rex drops Canberra to Sydney route, blaming Qantas bullying

The airline's route between Sydney and Canberra was launched during the pandemic with much fanfare, but it seems passengers weren't fans of the fare, and it has come to an inglorious end, with the final flight taking off last weekend.

The flights were part of a new approach by Rex to connect Australia's major cities, which are some of the most profitable aviation routes in the world. But the writing was probably on the wall for the Sydney-Canberra leg for a while, as it never really built up a loyal passenger base - something that's essential for such a business-dependent route.

There were regular complaints about the Rex setup at Sydney Airport, where passengers for multiple flights would cram into a small room to wait for a bus to take them to their aircraft ("It would've been quicker to drive to Canberra," was a common refrain). Although Rex launched a year ago with seven flights a day, the schedule and connections were often not as convenient as other options. And even its new airline lounges, much smaller and lacking many of the features of its competitors', offered no incentive for frequent flyers to change their allegiance.

For many discerning travellers, a robust loyalty program like Velocity is one of the most important factors when choosing flights, and Rex's lack of one was also a big problem.

For a leisure traveller who may only take a few flights a year, that may not be of huge concern. But for regular business travellers (who often fly on higher-earning fare classes), the difference between travelling on Rex rather than Qantas or Virgin Australia could be enough points for a free return flight to Europe every year! That's a hard thing to give up, especially when there are not many other good reasons to switch.

The route between Canberra and Sydney is not the only victim of Rex's latest round of cost-cutting, with more announcements this week that the airline will also end its flights at the end of the month between Sydney and Bathurst, Grafton, and Lismore, as well as between Adelaide and Kangaroo Island (Kingscote). Flights to Ballina will end on July 2 and the axe has also fallen on the route between Melbourne and Albury.

Rex is not going quietly, though. Flight club has become fight club, with the airline blaming Qantas's "bullying and heartless behaviour" for the cuts.

"Qantas's well-publicised predatory actions on Rex's regional routes have meant Rex no longer has the ability to cross-subsidise these marginal routes," Rex's deputy chairman John Sharp said.

"This behaviour is all the more unconscionable after receiving more than $2 billion in federal bailouts over the past two years."

For its part, Qantas has described the accusations as ridiculous. "Rex is always looking to blame others when it withdraws from regional routes, but none of its claims stack up to scrutiny," a spokesperson said.

"Rex has a monopoly on three of these routes it's abandoning, so if it can't make them work, it has no one else to blame but itself."

Stepping back and looking at the situation objectively, it's hard to see where the blame lies. The simple truth is that many of these routes just aren't financially viable for one airline, let alone two. So, yes, when Qantas moves into a space where Rex already had a presence, one of the companies may not survive. But if the survivor is Qantas - because passengers would prefer to have more convenient connections, better lounges, and earn frequent flyer points - is that a problem?

Well, yes, it is a problem. Because an airline like Rex, with an infrequent schedule across a large geographic area, subsidises some routes with others. Not every flight may make a profit, but they're all needed to create the critical mass for a useful network and loyal customers.

When Qantas starts flying between Melbourne and Albury and Rex has to cut that route, that has a flow-on effect through the whole airline. And ultimately that affects people living in the regions who may find themselves with no flights at all - as will happen on June 30 in Bathurst, Grafton, and Lismore, for example.

The June 30 date for the end of Rex's flights to those destinations is no coincidence. That's when the Federal Government's COVID-19 assistance package, called Regional Airline Network Support, comes to an end. So, should it be extended and taxpayers continue to subsidise flights in the regions? There's certainly an argument that these flights are critical infrastructure for many people and governments should chip in for their operations, just as governments support public transport in the cities. But, on the other hand, a support program would not be sustainable in the long term, so it may be better for airlines to find new ways to make larger networks more profitable.

Of course, Rex is still servicing 62 destinations across Australia, using a fleet of 66 planes. But you do have to wonder whether they will all survive the red pen of the bean counters if Qantas exerts its dominance to push into more parts of the country. And what will be the effect of the airline's strategy to compete more with Qantas and Virgin Australia on popular capital city routes? If Rex - branding that comes from a contraction of its official name of 'Regional Express' - isn't regional enough, perhaps it will just become Ex.