The voluntary administration of Bonza and now Rex has had a huge impact on the aviation industry.
There are many reasons why this has occurred which can be attributed to rising costs like aviation fuel, rising plane maintenance costs and the expenses of daily operations which are all putting pressure on an industry that is still struggling after the COVID-19 pandemic global shut-down.
There is also limited competition and dominant rivals like Qantas, Jetstar and Virgin Australia make it difficult to gain access to preferred gates and timeslots at airports.
This practice has been going on for years, but we are seeing the effects of new airlines struggling to establish themselves which is the goal to reduce competition.
According to Aviation Source News, Rex posted a profit after tax of $AU14.4 million for the fiscal year in 2023 but operational losses of $AU31.7 million and $AU109 million the previous years. So, what went wrong?
On the surface it appears to be simply mismanagement. But it is more likely the expansion of the fleet too quickly, the introduction of capital city routes and not selling all seats on flights leading to the company’s demise.
To try and recoup some of the losses there are various proven strategies which Rex could have adopted.
Reducing labour costs, selling of assets and streamlining airline routes are the obvious ones.
The other is to charge the customer more, but we know that charging a higher ticket price is not the solution long-term.
Customers will not pay for perceived reduced value for money, meaning charging more for a ticket than they previously have paid does not lead to greater customer service and patronage.
DR Paul Strickland, Senior Lecturer in Tourism, Hospitality and Event Management at La Trobe Business School
So where does this leave the industry? Skilled employees are losing their jobs, with potentially little to no chance of being employed in the aviation industry in the foreseeable future.
This includes flight attendants, pilots, maintenance workers, luggage handlers, security workers, hospitality employees…the list goes on.
And what happens now if these redundant employees live in regional and rural areas? What is their alternative for employment? Move to the city or change careers?
That said, there is light at the end of the tunnel. The competition has reportedly offered replacement seats on capital city flights for free although there are reports of customers having to pay up-front to secure a ticket.
Rex will continue to service regional areas until a real solution is found; this means government intervention or finding a company who will financially back Rex.
It is the Federal Government’s responsibility to ensure essential services to regional communities but that does not necessarily extend to the aviation industry. Support packages are welcomed but it is not a long-term solution.
The only way the aviation sector can guarantee services is if the government owns a controlling share of the airline of more than 51 per cent.
If not the government, a financial investor or two with deep pockets. This will secure the future of the airline and deliver important services to regional areas by giving access to health services, education and tourism opportunities.
If we cast our eyes to Qantas – 240 shareholders control 82.49 per cent of the stock. The other 133,152 shareholders really have no power or say in the direction and management of the company.
This model should be emulated and would be a winning tactic for the federal government, regional voters and local councils who often oversee the daily operations of regional airports.
Although there is a promise to keep Rex flying, any new airline entrants will face the same fate as Bonza and Rex unless rules and regulations are changed and that is unlikely to happen any time soon.
Rex posts profit for 2023 financial year – AviationSource News
