The collapse of Rex could lead to significant price jumps in airfares on regional routes, hitting domestic travellers hard, according to a tourism expert.

Rex Airlines announced late Tuesday it has gone into voluntary administration and cancelled all flights between major airports.

A statement posted on Rex’s website said Regional Express Holdings Limited and a number of its subsidiaries under the Rex Group have entered voluntary administration.

Ernst & Young Australia have been appointed administrators.

The statement said regional Saab 340 flights were unaffected and would continue to operate, but domestic 737 services have been halted with Virgin Australia offering affected Rex passengers free rebooking.

“Flights between major airports have been cancelled, with the Rex Group’s domestic fleet of Boeing 737 aircraft all grounded,” the statement said.

“Affected customers are being contacted directly by Rex.”

Rex and Virgin Australia are exploring ways to support regional customers, including Virgin selling Rex’s regional services through codeshare or interline arrangements, and making Virgin frequent flyer benefits available to Rex’s regional customers.

Impacted Rex customers will be supported with rebooking on equivalent Virgin Australia flights free of charge if they contact Virgin Australia before August 14.

Big dreams could be Rex’s downfall

Airfares on routes between capital cities were not likely to be affected if Rex were to fold, University of Queensland Business School professor of tourism Pierre Benckendorff told The New Daily.

But the sudden loss of competition on more regional routes could leave airfares open to significant price jumps, and some routes could disappear altogether.

Benckendorff said Rex likely ran into trouble after trying to move into the capital city routes in an effort to rival Qantas and Virgin Australia.

The expensive gambit involved adding three Boeing 737s to the airline’s fleet in 2023; the company was also working on becoming the first airline in Australia to run a fleet of commercial electric planes.

Although Qantas Link, Virgin Australia, and other smaller players service some regional routes, the loss of Rex would still leave a large gap.

“I kind of feel a bit like Rex should have stuck to what they were good at, which was servicing those regional routes,” Benckendorff said.

“Almost all of [the regional routes] had no competition or very few few competitors, and so if [Rex] were to go down and the regional routes went down with them, that would be a real shame.”

Benckendorff said over the past couple of decades in Australian aviation, most airlines that went into administration never came back, with the exception of Virgin Australia.

But the death knell has not yet rung for Rex.

He said administrators could potentially save the company by pulling out of the recent Boeing 737 leases and giving up on inter-capital city routes.

Major airlines slammed for squashing competition

Transport Workers Union (TWU) national secretary Michael Kaine told The New Daily the uncertainty around Rex’s future has left 2000 workers jobs in limbo, and exposed an “aviation industry in crisis”.

The TWU this week renewed calls for the establishment of an independent Safe and Secure Skies Commission.

Kaine said larger airlines, particularly Qantas, were stifling aviation competition in Australia.

Qantas came under the microscope last year for hampering Qatar Airways’ efforts to gain greater access to routes and airport slots for international flights, and Kaine said the airline was similarly protective of domestic routes.

“[Qantas] really has got a track record of simply deploying commercial retribution if any of these carriers start to penetrate or impinge upon their traditional routes,” he said.

“For example, we know that Rex in 2021 started running a Melbourne to Sydney route, and the effect of that was actually to bring down prices.

“But the response … from Qantas was to deploy aircraft to regional routes … that only Rex serviced. So one of those was Melbourne to Burnie, and of course there’s just not the demand to support two airlines flying that route.”

Rex complained to the Australian Competition and Consumer Commission (ACCC) in 2020 and 2021 about Qantas’ alleged ‘capacity dumping’ (purposefully significantly increasing capacity beyond expected demand).

Kaine said recent collapses of airlines could deter other companies from entering the sector and providing more competition to keep workers employed and airfares down for travellers.

“We need a standalone regulator, a Safe and Secure Skies Commission, that can start … setting standards and putting in place fairness that is in the community interest,” he said.

“We’ve got companies like Rex that are on such marginal … profitability, and then you’ve got Qantas that took nearly $2 billion worth of community support during Covid, now reporting $3.72 billion profit … over a period of 18 months. You’ve got airports, that combined last year, are recording profits of $1.7 billion.

“This is lopsided and it can’t continue.”