News Rex launches price war on Sydney-Melbourne route

Rex launches price war on Sydney-Melbourne route

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Rex Airlines has ignited a fierce price war on flights between Sydney and Melbourne, with airfares for ‘less than the price of a bus ticket’.

Rex released $39 fares on Monday that triggered a hasty response from airline heavyweights Qantas and Virgin.

But aviation expert and former chief economist at Qantas, Dr Tony Webber, is warning these deals are “are not as generous as you think” and come with “huge caveats”.

Rex announced it had slashed the cost of flying between Sydney and Melbourne, which is one of the busiest flight routes in the world, to $39, making it “even cheaper than the cost of catching a bus between the two capital cities”, according to a company statement.

Its deputy chairman, John Sharp, said there will be “hundreds of thousands of $39 fares available” as “this initiative will single-handedly revive a moribund travel and hospitality industry in the two cities”.

Rex told the ABC its $39 price, which is available until August 28, will not apply for every available seat.

It didn’t take long for Virgin Australia to also drive down the price of a one-way ticket between Sydney and Melbourne to $39.

Virgin said it would offer these “record low” airfares until December 28.

It even threw in the option to select seats and earn Velocity Frequent Flyer points and status credits.

Rex’s Mr Sharp expected other airlines to play “copycat”. Photo: AAP

In a statement, the company said it was “committed to providing travellers with some of the most competitive airfares”.

Their $39 flights between Sydney and Melbourne is “just one example of how irresistible it is to fly with Virgin Australia”, the statement read.

Meanwhile, Qantas’ budget airline Jetstar went a step further and revealed its prices would fall to just $30 on the Melbourne to Sydney route.

The offer is available until the end of August and excludes check-in baggage.

‘Not as generous as you think’

Rex, which is formally a regional airline, may be “struggling to get passengers on their aircraft, along the Golden Triangle route – Melbourne, Sydney and Brisbane”, and therefore was “trying to use price as [a] mechanism to generate more brand awareness, exposure and word of mouth traffic”.

That’s according to the head of Airline Intelligence & Research, Dr Tony Webber, who said hopeful travellers can “rush in if they want a discount” but that’s “if they’re not worried about snap border closures”.

“I would be,” he told the ABC.

Rex Airlines passengers disembarked at Tullamarine Airport in Melbourne for the first time on March 1. Photo: AAP

Rex’s first Melbourne-Sydney flights took off in March in a bid to challenge Qantas and Virgin Australia on more big-city routes.

“These deals are not as generous as you think,” Dr Webber continued.

“The airlines would only be offering about two or three seats per flight at such a low price.”

He said for airlines to cover “the cost of cabin crew, service, pilots and the aircraft itself” for the Sydney-Melbourne route, they would need to charge passengers $100.

That means the $39 fare is simply unsustainable, Dr Webber explained.

Even if they were to only offer a handful of seats for $39, “in normal pre-COVID times, those airlines wouldn’t be able to sustain a deal like that for more than 12 months”, he said.

Dr Webber said the “race to the bottom” strategy these airlines have opted for is nothing new.

“Back in 2013-14, Qantas and Virgin were competing heavily on price, capacity or number of seats in market and their profits went pear-shaped. They don’t want to revisit that I’m sure,” he said.

“But with Rex competing now, Qantas and Virgin don’t have an option but to follow – which is not a great outcome for profitability.”