REX: To fly the golden triangle [SYD-MEL-BNE] from March 2021

REX – Regional Express airlines indicated that it was exploring the possibility of flying domestic capital city to capital city routes in Australia, about the time Virgin Australia went into administration. Now it is moving along with that plan.

Background

The history of ‘third’ domestic airlines in Australia, has not been a great one. Remember Air Australia [2008-12] and before them Compass Airlines [1990-93]? I think I flew on Compass.

The history of ‘third’ Australian airlines has been stranger since then, with Qantas’s Jetstar actually doing well, but Tiger Air, either as a subsidiary of the a Singapore based company or when Virgin Australia bought it, never turning a profit and is now expected to disappear given Virgin’s administration.

Domestic Routes

REX has announced that it intends to take a piece of the very lucrative ‘golden triangle’ of flights between Brisbane, Sydney and Melbourne using a fleet of 5 to 10 single-aisle jets. It wants to compete in that ‘mid-market’ or as they call it ‘hybrid’ area – exactly where Virgin Australia Mk 2.0 wants to play.

“With REX’s expansive regional network of 60 destinations, existing infrastructure in all these capital city airports, superior efficiencies and unbeatable reliability, it will simply be an incremental extension for Rex to embark on domestic operations especially since one out of every ten flights in Australia was already a Rex flight during the pre-COVID days.”

John Sharp, Deputy Chairman, REX

REX will continue to use established facilities in Sydney and Melbourne to base its domestic operation.

Funding

REX thinks it can fund this for about AU$30 million, which sounds very low to me – but without aviation experience or an economics degree – what would I know?

Leveraging on Rex’s existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35% below Virgin’s Australia’s (pre-COVID) with 50% lower additional headcount needed proportionately.”

John Sharp, Deputy Chairman, REX

Given that Qantas managed to raise AU$1.9 billion in basically a day, there does seem to be some appetite out there in the market for aviation investment, so maybe REX will have no problems raising a mere AU$30 million.

The Aircraft

We don’t know what aircraft they will use, but given they are going to refresh their fleet with ATR42 and 72’s on regional routes, and they have just signed a memorandum of understanding with ATR to set up a simulator and provide training through their pilot school – I’m thinking they might use ATR planes. The downside is that these are still turbo-prop aircraft and Qantas and Virgin Australia run Boeing 737 jets on these routes.

On the other hand, second-hand planes for leasing, or indeed even new planes will be a relative ‘dime-a-dozen’ in this COVID-19 era. Airlines are grounding planes, cancelling or re-negotiating aircraft leases, left, right and centre, so REX could even look at the Airbus A320 family, or just get what everyone else is using on the ‘golden triangle’ – Boeing 737’s. Maybe they could even us the MAX variety should they ever get to go back in the air.

Pricing and service

Expect a price point near the reborn Virgin Australia. That is below Qantas, but not as low as Jetstar. REX will include baggage in their price, and run lounges. Their current lounge network (Adelaide, Melbourne and Sydney) is tied to subscriptions and not a loyalty scheme. They will need to open a lounge in Brisbane.

“Rex’s domestic operations will be priced at affordable levels but will also include baggage
allowance, meals on board and pre-assigned seating. Booking channels will include both
Rex direct and Global Distribution Systems (GDS). Lounge membership will be available for
subscription. It will be a hybrid model that Rex has so successfully pioneered over the last
two decades for its regional operations.”

John Sharp, Deputy Chairman, REX

Rex doesn’t do Business Class. You can book a ‘Rextra’ legroom seat for an additional AU$4.80, and you can join their business flyers program, which gives you 2 free trips for every 18 sectors flown:

‘The program offers two (2) Reward Flights (exclusive of taxes and charges) for every eighteen eligible flight sectors flown. Reward Flights are redeemable on any sector on the Rex network.’

Rex website

Whether they stick to this, add in Business Class, or maybe have an extra legroom zone on their domestic routes, we shall see.

Loyalty and frequent flyer scheme

Rex doesn’t currently run a loyalty program other than the ‘business flyer’ scheme. Lounge access is not tied to loyalty but to a subscription and they have no status tiers or entitlements. That means they don’t have access to the modern-day ‘rivers of gold’ Loyalty income streams that Qantas and Virgin benefit from.

Their statement offers no information on this, but if they are going into the capital city domestic market, they really need to think about a loyalty scheme, as all their competitors have one.

2PAXfly Takeout

This is another timely reminder to wear your seatbelt when seated. Holding you close to your seat will protect you from the sort of injuries sustained on this flight, when unsecured passengers flew to the ceiling of the aircraft, and then came crashing down once the ‘drop’ ceased.

The hope will be that this is an anomaly – a ‘freak accident’ in casual parlance. If it is a systemic error either mechanical or electronic, then this is a larger concern for the airlines that fly Boeing Dreamliner 787 aircraft. Let’s hope it isn’t. If it is, it will pile on the woes to Boeing’s existing stack.

I think this is an interesting move from REX. The 2021 launch date is probably wise, although it limits them taking advantage of Virgin Australia’s current difficulties. Whether Australia can support a third/forth domestic airline, we shall see.

Rex should seriously consider launching a loyalty scheme to make them competitive with Qantas and Virgin Australia for their new capital city market.

Oh, Yes, and the Rex website is something out of the pre-tech-crash era. It is in desperate need of a make-over which I hope is covered in that AU$30 million figure. They do have a mobile booking site, but no app from what I can tell. All this just reinforces their image as a country bumpkin.