REX: In profit, adds Hobart and new Frequent Flyer program?

Regional Express or REX are the usually quiet Australian domestic airline market performers. Mainly a regional player, they expanded into domestic capital city flying just prior to the pandemic. Like all airlines, they suffered but were paid by the Australian Government to retain some of their regional routes, throughout COVID-19 lockdowns.

In Profit?

Yesterday, they recorded a modest statutory profit after tax of AU$14.4 million. That’s compared to a loss of AU$42 million back in 2022.

Without going into the financial complexities too deeply, they had an operating loss before tax of AU$31.7 million. However, they were able to offset this against an AU$ 44.5 million contribution through the acquisition of National Jet Express a year ago in September 2022.

Now, Flying to Hobart

As of 17 August 2023, Hobart became the sixth capital city REX is flying to, out of Melbourne. That is despite a technical glitch that saw the pilots rejecting the initial takeoff a few seconds after acceleration commenced. The Boeing 737-800 NG service will see 128,000 seats added to the route in the first year. The new flights are:

• ZL 709 departs Melbourne at 12:15 and arrives in Hobart at 13:30
• ZL 710 departs Hobart at 14:15 and arrives in Melbourne at 15:30

The 75-minute REX flights move forward by 15 minutes from 29 October to March 2024.

New Frequent Flyer Program

In their presentation to investors yesterday, the airline cites a ‘Frequent Flyer Programme to be launched in Q1 FY2024’. That means it will arrive soon. Q1 of FY2024, by my calculations, is the quarter that runs from July to the end of September 2023. So, a new Frequent Flyer Program should be but mere weeks away.

A Frequent Flyer program that rewards loyalty from passengers is an essential part of any serious domestic or international airline. Not having a contemporary and competitive program is probably handicapping the airline from growing in the domestic market.

They currently have an unsophisticated program that gives you a free 10th flight after taking 9. It’s a bit folksy, and a little bit country, like the airline and its deputy chairman, John Sharp.

But there is nothing ‘little’ about their ambition for the program. ET has seen an investor presentation in 2020 that predicts the frequent flyer program would end up: ‘with an eventual value between $1 billion and $1.6 billion “in 3-4 years” after capital city flights commence.’

REX announced back in May 2022 that it was committed to making the program linked and compatible with US partner Delta Air Lines ‘SkyMiles program. The intention is to provide reciprocity in flights ticketing, and baggage services across the two networks.

It’s expected that the new program will be more contemporary with points, and possibly status credits earned according to mileage flown and/or money spent. The usual benefits like redeemable flights and lounge entry are also expected.

Business Program

REX already runs a Business Flyer Program, with a two-year membership fee of AU$99 for anyone with an ABN. It’s pretty simple. Any employees can attach the companies membership number. EArn 18 points within 2 years, then, the business gets two reward seats for flights across the network. That applies to any of their flyers, valid for 6 months.

Competing with Qantas and Virgin Australia

The big boys of the loyalty system, each with roughly 15 million members, may have done all the deals. To make income from the scheme that is not related to flying, REX is going to have to broker deals with banks, credit card providers, and a full range of retailers. It might even need to launch its own shopping portal.

Essentially, REX is very much behind the eight ball here. It has a lot of very sophisticated loyalty marketing ground to catch up. It’s going to have to balance the need to get something working that is competitive off the ground as soon as possible with its ability to broker deals and form retail partnerships.

Then there is the question of whether the Australian market is big enough for three airline-based loyalty schemes.

2PAXfly Takeout

It’s going to be a daunting hill to climb. REX does not present as the most sophisticated player on the field. I wish them luck and look forward to seeing the shape of their new loyalty scheme. Whether it is miles or revenue-based, and whether it has anything new to offer on the frequent flyer landscape.