Australians will be paying more for east coast airfares unless Rex Airlines is allowed to fly from Sydney Airport, the consumer watchdog has warned.
Australian Competition and Consumer Commission chairman Rod Sims is urging the government to grant a recent bid from airline Rex for permanent slots at Australia’s largest air terminal, telling The New Daily a new competitor deserves a fair go against Qantas and Virgin.
The airline currently uses temporary space but has applied for ongoing slots from October 24, access that Mr Sims said is required for it to be competitive.
Since Rex started amping up its services, airfares from Sydney to Melbourne, Canberra and Brisbane have been shaved across the board.
“Rex getting off those routes because they can’t get slots at Sydney Airport would be an appalling outcome,” Mr Sims said.
“Without the threat of an actual new entrant into the market, consumers are going to be paying way more than otherwise.”
Deputy Prime Minister Michael McCormack is responsible for deciding whether to grant Rex’s application; he received advice on the issue back in January from former Productivity Commission boss Peter Harris.
But that report still isn’t public, and with only four months until Rex hopes to gain the slots, Rex deputy chairman John Sharp said the airline will be hard pressed to put a schedule together to begin advertising its service.
“It’s not one of those things you can just do the week before … we need certainty to go out and sell tickets,” Mr Sharp told The New Daily.
Prices could be 10 to 15 per cent higher
Mr Sims said Australians will be paying more for flights on most major routes if Rex’s bid is denied, citing much lower prices recently as the airline has moved into more direct competition with Qantas and Virgin.
“This visibly affects Melbourne, Brisbane, Canberra as well as Sydney because that’s where these flights from Sydney go,” Mr Sims said
“This applies right down the east coast of Australia.”
Tony Webber, an aviation expert at UNSW and former chief economist at Qantas, said Sydney Airport was key to Rex’s ability to compete in the “golden triangle” routes between Sydney, Melbourne and Brisbane.
A third competitor makes these prices 10 to 15 per cent cheaper, he said.
“[Rex] needs to have access to slots between 7am and 9am in the morning and between 4pm and 6pm in the afternoon,” Dr Webber told TND.
“If they haven’t got access to those slots, they won’t be competitive.”
Dr Webber said airlines typically require at least 12 months between a bid being granted and being able to schedule and advertise a service.
Rex’s last bid denied
Mr Sharp would not say which slots Rex has applied for, but the airline is currently using space freed up by international airlines, which cannot fly most of their services under the international border closure.
The new bid concerns space freed in the COVID-19 aviation shakeout, which saw Tiger Airlines collapse, The New Daily understands.
Rex already applied for these slots in January, but was not allocated any beyond March because of rules allowing airlines to keep existing space.
It instead was given interim slots handed back by overseas airlines.
“We don’t know how long that grandfathering will last,” Mr Sharp said.
Mr Sims said the pandemic had created an opportunity to provide a new competitor with ongoing access, with lots of space at the airport unused.
“We’ve got a perfect opportunity. Both airlines [Qantas and Virgin] are requiring less slots … the slots available are long term,” he said.
Bid ‘being considered’
In a statement, Mr McCormack’s spokesperson said Rex’s bid is still being considered and that the Harris report will be “released shortly”.
“[The government] values a strong, sustainable and competitive aviation industry. How demand management at Sydney Airport can support this, in the short and long term, is currently being considered,” they said.
Qantas, which has received more than $1.4 billion in federal government funding during COVID-19, declined to comment.
Virgin also declined to comment and has not made its view public.
Qantas hasn’t opposed Rex’s bid outright, but is understood to prefer the status quo – under which Rex doesn’t have ongoing Sydney slots.
Qantas boss Alan Joyce has previously said he doesn’t think there’s room in Australia for another major airline, but Mr Sims disagrees.
Mr Sims said he ultimately doesn’t know if Rex will succeed, but believes the airline should have the opportunity to give it a crack.
“[Rex has] been in business for a very long time. It’s a very well established and very experienced airline,” he said.
Mr Sharp is optimistic Rex has what it takes to offer a more competitive service than Qantas on major routes, but said it will ultimately be down to the government as to whether the airline is granted ongoing slots.