Sims said any suggestion only two airlines could service key routes was “nonsense” and said Australians would keep paying more for flights until the government addressed systemic problems in the industry.
“The government outsources the management of the slots at Sydney Airport to a company that’s majority owned by Qantas and Virgin, it is just unbelievable,” he told ABC radio on Thursday.
“When (Rex) wants those key slots they must have to be viable, they have to go and ask that from Qantas and Virgin.
“The government sets this system up for failure, it sets this system up for a duopoly and therefore sets the system up for higher airline prices than Australians should be paying.”
Research provided by the Australian Airports Association said airfares on flights between Melbourne and Perth dropped by 40% when Rex began competing on the route, adding 46,000 seats a year in extra capacity.
Transport Minister Catherine King has said the government is working closely with administrators to ensure the airline’s survival.
But she has faced opposition criticism for leaving a review of demand-management slots at Sydney Airport sitting on her desk for months.
She said the government was working through a suite of significant slot reforms announced in February.
Commercial flights require a slot to land at Sydney Airport, with 80 available each hour of its 6am-11pm operation.
Swinburne University law and corporate governance specialist Helen Bird told AAP a government bailout of Rex would need strict conditions and could require it to take a seat on the board.
“Whoever is the new investor, be it government or otherwise, is essentially taking up fixing a corporation that got to where it is because of poor governance and poor management,” she said.
A failing company would not attract unconditional funding, Bird said.
“Unless you saw it as an essential service, which it is in regional Australia, and you said, ‘well, if we are going to give that kind of money as a government we’ll need to have a shareholding stake’,” she said.
“We haven’t done that in the past, certainly with Qantas, and the government gave lots of money to Qantas during Covid.”
Sydney University professor Rico Merkert said Rex was making considerable profits on its regional flights and it might not need government support.
“On many of the routes there was little to no competition, allowing Rex to generate high yields and sustainable profit margins,” the Institute of Transport and Logistics Studies deputy director said.
“The aircraft were old and they would have had to replace them at some point but that was in the planning, including electrification projects.”
In February, Rex reported a net loss of A$3.2 million for the first half of the 2023/24 financial year as it burned through money spent on its major city services.
Around one-third of the airline’s 2000 employees are expected to lose their jobs with the end of major-city operations, the Transport Workers Union has said citing estimates from administrators.
Rex has struggled with profitability since aggressively expanding in 2021 to compete on capital-city routes against Qantas and Virgin Australia.
Investment firm PAG made A$150m ($165m) available to support those domestic jet operations and has been contacted for comment.
Merkert told AAP the capital-city route expansion is where the airline hit turbulence.
“Rex’s decision [or] execution of competing on capital city routes was flawed from the get-go,” he said.
“Rex operated its Saab 340 network to regional centres quite successfully over many years.”
EY administrator Samuel Freeman has forecast a “relatively short” administration period before new investment takes the business forward.
“There’s a great prospect, there is a future for Rex, and it’s a strong likelihood it will be delivering services to the people of regional Australia,” he told ABC Radio.
Virgin is exploring selling Rex’s regional services through codeshare or interline arrangements and providing frequent-flyer benefits.
By early Wednesday morning, nearly 5000 Rex customers had contacted Virgin for a free transfer.
Many regional communities rely on the carrier, which emerged from Ansett’s ashes in 2002.
- AAP
