Rex to challenge Qantas, Virgin Australia on capital city routes

A $200m warchest and a fleet of Airbus or Boeing jets would see Rex become Australia's new challenger airline.

By David Flynn, May 12 2020
Rex to challenge Qantas, Virgin Australia on capital city routes

Regional airline Rex plans to launch flights between Australia's capital cities, taking on Qantas and a reborn Virgin Australia in the process to create what it calls "a three-airline market."

The ambitious project would see Rex carve out a share of the east coast's highly-profitable 'Golden Boomerang' corridor as well as the coast-to-coast transcontinental route.

“Presently Rex flies from to the regional centres to all the capital cities in Australia," Rex deputy chairman John Sharp told ABC Radio, "and the proposition is that we add to that by flying between (the capital cities)."

Rex's capital city push would call for a $200m warchest courtesy of deep-pocketed investors.

“We have been talking to half a dozen private equity and investment banking entities about investing in this new venture,” Sharp told The Australian Financial Review, adding that Rex intended to settle on a single partner "in the next three weeks or so."

This announcement by Rex also appears timed to spoil or at least soften initial bids for Virgin Australia, the first round of which are due this Friday, May 15.

Administrator Vaughan Strawbridge of Deloitte has previously said 20 "interested parties" were scoping out the sale, but their bids could be reduced if they see a more competitive market taking shape in what has until now been considered a two-horse race.

Deloitte's pitch to the would-be owners of Virgin Australia highlighted its key domestic routes, including the 'Golden Triangle' of Brisbane, Sydney and Melbourne, which it described as "historically one of the most profitable operating jurisdictions globally for air travel."

What capital cities would Rex fly to?

Rex currently connects regional centres to one another and also to many mainland capitals, but its new capital city service would offer direct flights between Sydney, Melbourne, Brisbane, Adelaide and Perth.

This would mirror the core domestic network of Qantas, Virgin Australia and Jetstar, although the number of routes and the frequency of those services would depend on how many aircraft Rex could field.

What aircraft will Rex fly?

To launch its capital city network, Rex would seek to lease 10 single-aisle jets, either in the Airbus A320 or Boeing 737 series.

The airline believes that in the current depressed state of the air travel market, these jets would be available at very attractive rates.

Will Rex capital city flights be low-cost or full-service?

Rex deputy chairman John Sharp tells The Australian Financial Review that the new capital city service would be a cross between Qantas and Jetstar but with a lower cost base, saying "this will be halfway between a full-service airline and a low-cost airline."

This is a similar 'hybrid' model that's been mooted for Virgin Australia Mk II and also flown overseas by the likes of JetBlue, Norwegian and, some would suggest, AirAsia X.

Will Rex capital city flights offer business class?

Rex's capital city playbook is still a work in progress, but is more likely to include a 'premium' cabin rather than full-service business class.

However, this could extend to being more of a European business class model where the middle seat in a 3-3 layout remains free – and is perhaps dressed with a temporary plastic shroud, similar to what's done on British Airways' Club Europe services – along with a little extra legroom or recline compared to other economy seats.

When would Rex begin capital city flights?

Domestic travel restrictions imposed due to the coronavirus pandemic give Rex some breathing space to develop its new network, which will also include hiring new pilots, cabin crew and ground staff, as well as negotiating with airports for precious take-off and landing slots.

The capital city service is expected to begin in March 2021, with Sharp allowing that "the domestic aviation market is not going to go back to what it was three months ago so we are ready to scale up in line with demand."


David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 253

I like the sound of this - More competition. Although would it still be called RegionalExpress if not just regional!?

Virgin Australia - Velocity Rewards

26 Jun 2011

Total posts 77

I would assume it would be just REX.

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 253

The new A220 aircraft could be ideal for them to begin taking a slice out of the market.


Qantas - Qantas Frequent Flyer

17 Jan 2012

Total posts 171

And probably a better sized and more efficient aircraft to challenge the incumbents instead of going for the larger A320 or B737.


19 Apr 2012

Total posts 1435

The A220 would be perfect but maybe too expensive as there is no second hand market unless the an really squeeze a lessor

they'll surely lease ex virgin B738s for much much less than A220s & they could have the ex virgin aircraft anytime they wanted them. It's a buyers market out their for aircraft, even though they will be leased. Here there are a few thousand ex virgin staff including pilots looking for work right now as well, many of whom have mortgages/bills to pay & who will work for much less pay that they got at virgin.

Virgin Australia - Velocity Rewards

26 Jun 2011

Total posts 77

Not surprised by this after Kim Lim Hai's comments last week regarding Virgin - Make some noise, cast doubt over the administration/restructuring before announcing their challenge.

12 May 2020

Total posts 2

Please, anything but overpriced & god awful “European” business class.

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 253

I don't see that euro business working here personally, especially up against QF and VA business class - if the latter remains that is. Still require a 2x2 arrangement to be competitive and get my money. More case for the A220 aircraft for REX!

Qantas - Qantas Frequent Flyer

02 Sep 2018

Total posts 156

RIP for Canberra and Darwin

Virgin Australia - Velocity Rewards

14 Mar 2017

Total posts 155

REX doesn't fly to Canberra anyway... what's your point?

Qantas - Qantas Frequent Flyer

20 Aug 2014

Total posts 150

Great time to move into the market. Can only see it working if Virgin is liquidated though. I wonder if they'll pull out if Virgin is resurrected? Is 10 jets enough? With only 10 jets I'd probably leave Perth to the big boys and concentrate on the Golden Triangle routes where most of their regional flights connect.

Virgin Australia - Velocity Rewards

14 Mar 2017

Total posts 155

Well, there is always the possibility that this IS Virgin Mk II...

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 314

This would not be VA 2.0 as it wouldn't carry the Virgin name, and it would not be using any of VAH's AOCs.

It'll be basically be using REX's AOC, plus there's also the process of REX having to apply to upgrade their AOC to fly mainline jets.

Virgin Australia - Velocity Rewards

14 Mar 2017

Total posts 155

You need to think outside the box... ;)

Rex has already applied to upgrade their AOC. Sharp, former transport minister in howard govt, surely knows his way around halls of canberra/Casa. Am sure it can be fast-tracked. Hold on, he's already seen scomo (this is a guess - bit like branson flying in to see howard I tihnk it was, at the time). It's a done deal.

12 Dec 2012

Total posts 1024

More like Ansett Mk 3.

10 aircraft is just a start. With just 10 you can run a very good schedule on the golden triangle & then add a few more for PER. ADL might be last cab off the rank.

Etihad - Etihad Guest

19 Mar 2018

Total posts 72

You know what,

I am seeing parallels between Australia and India... You have strong offshore rivals in Middle East, Asia (Southeast Asia and US/ New Zealand), and I could see Qantas following the footsteps of becoming like Vistara as the sole premium full service domestic airline, and flying 787s everywhere from one base, aka Brisbane or Sydney, and then partnering and interlining with every other full service airline..

And then just like India where SpiceJet and IndiGo dominate domestic with a skeleton Vistara-Air India (at this point all Vistara needs to do is slice of Air India domestic and takeover their international network and they're done, feasible, given Air India's domestic market share is so low anyways), we could see VirginGo Australia and A'REX with Qantas. Voila.

23 Oct 2014

Total posts 232

I don't believe this has any merit, and with a re birthed Virgin, combined with the potential to restart Tiger with flights Australia wide with a group costs rapidly reset much much lower from the administration, an airline exposed to only a handful of routes will lead to extreme pressure in a post COVID depressed economy. Rex does not even have CASA approval to operate 180 seat jets. Nice idea, but will not happen. Rex is a niche operator that specialises in operating low cost aircraft (read 20-35year old turboprops low capital) in regional markets with often NO competition and even on government subsidised routes. It's not an expert and at running modern large jets on trunk routes in full competition.

This has been tried before - Impulse airlines and even Tamair.

The timing of the announcement and the announced timeline is worth noting.

Qantas - Qantas Frequent Flyer

11 Dec 2017

Total posts 52

Given current conditions I suspect CASA will happily hand them whatever AOC is necessary to facilitate their future operations... that said, they could easily get by with sub-180 seat aircraft ;)

24 Sep 2019

Total posts 13

Not sure that $200 million would even come close to getting this plan up and running, given that this is the same airline that threatened to cease flying just five weeks ago. I agree, the timing of the announcement is strategic.

A huge % of QF profit comes from golden triangle. I think it would be way over 50%

Rex has plenty of slots at SYD.

Extremely cheap aircraft, crews & other staff. Already fly into all cities.

It's certainly not starting from scratch. Any bidders for virgin just walked. Qantas share price will be hammered & they must be very worried at QF HQ about how to respond.

Virgin Australia - Velocity Rewards

17 Aug 2017

Total posts 22

A220 would be perfect for REX but 737/A320 are cheap on lease for the near future.


Qantas - Qantas Frequent Flyer

17 Jan 2012

Total posts 171

True that - Not a lot of spare A220's lying around.

26 May 2016

Total posts 17

I do like this plan however, i think the ambition of will fall somewhere between what is stated and taking up the slack forfeited by virgin australia regional and tiger airways with maybe say c-series or e jets.

03 Jan 2013

Total posts 52

Absolutely this could be "Virgin II" in all but name only. Same applies to Air North and Alliance. All 3 of these are potential vehicles for a new national airline but Rex in particular has been very well run and at one point was the worlds most profitable airline (pro rata).

No one in their right mind would tip money into VAH, badly run for 10 years and almost $7B in debt - a good company with a strong operating model, please! The only people that believe that are the administrators and Scurrah - nothing will ever change the facts. VAH is a basket case and liquidation is the best outcome to bring the best return to creditors, structural deficiencies and years of mismanagement overseen by a complicit board and major shareholders have seen to that. No profits and $7 billion dollars in debt, this is not a defensible position!

Further, the administrators are showing no interest in undertaking the badly need industrial reform that would truly lower the operating cost base - ie: first officers being paid as pilots, who signed off on that? All Deloitte are interested in doing is repackaging VAH, renegotiating some leases and selling it off to become someone else's problem (i'll take my fee now) and we'll all be here again in another 10 years. Buyer beware - this business model has $7 billion dollars in debt!

It's all well and good to get all misty-eyed and sentimental (like we did with Ansett) but try that on with the small to medium business who carry most of this debt - and it's $7 billion dollars in debt. Mum and dad, family businesses. The same businesses who'll be told to expect nothing or only a few cents in the dollar. The same businesses who will be expected to turn around and be suppliers to VAH 2.0. The same business already suffering because of COVID-19. Unsecured creditors are likely to get zip.

Staff are at least supported by the taxpayer through the Fair Entitlements Guarantee and will see some benefit (which is actually quite generous) - unpaid wages up to 13 weeks, unpaid annual leave and long service leave, payment in lieu of notice—up to five weeks and redundancy pay—up to four weeks per full year of service. So, it's not so bad for them considering their former bosses racked up $7 billion dollars in debt.

Secured creditors will almost certainly have more to gain through an orderly liquidation than a repackaging of a badly run airline.

Then everyone can line up for opportunities to support a new player or players.

As for Velocity, it's stand-alone. It could easily be sold off as-is, potentially to REX or a new player - plug that in, ad a few jets and you've got instant loyalty.

People will go where the points are.

Qantas - Qantas Frequent Flyer

26 Nov 2012

Total posts 95

All the VA admirers will shoot you down, but you're right. If any regular business owed (pro rata) the same amount, it'd be all over for them. Sentiment aside, VA should go and REX could build up a nice little earner for themselves

22 Apr 2020

Total posts 8

Nixjet - What are you even talking about with this statement? ... "ie: first officers being paid as pilots, who signed off on that?"

30 Apr 2020

Total posts 14

Don't think they'll be a serious competitor even if they happen to get it off the ground. This is the worst time to launch a interstate routes with demand bound to be slow. Looks even more foolish if Virgin makes a return. Won't be big enough or have the regular scheduling, more like a Tiger 2.0.


Qantas - Qantas Frequent Flyer

17 Jan 2012

Total posts 171

Well it's not like they are going to start Jet operations tomorrow. In 6-12 months time, things will have stabilized.

And don't forget they have regional feed that could help with the Inter-state routes.

timing is perfect, couldn't have been better. Virgin mark 2 is looking less likely everyday. Recession means many business flyers who pay top dollar will be looking for cheaper options, but wont' fly jetstar with the low frequency on golden triangle.

Qantas - Qantas Frequent Flyer

27 Nov 2017

Total posts 16

This could be a diversionary tactic by REX to reduce the price of the new VA which they would like to invest in. Perhaps their real strategy is to build a hub and spoke airline connecting trunk and reginal routes. At the moment they don't control the feed traffic into their rural towns through SYD, BNE etc. ceding much of this traffic to QLink and Virgin Regional.

Otherwise, building a trunk airlinbe from scaratch doesn't make snse to me. Have they not learnt from the history of Compass 1 and 2, Impulse etc. The idea of establishing a hybrid airline has also proven to be a challenge. VA wanted to be such an airline but after years of red ink it found it was caught in a pincer between QF and JQ - neither attracting big corporates nor the price sensitive SMEs who went to JQ.

Side note: I believe VA Mark 2 should take its current carcass and sunk-investment into a full service airline and run with it at the same time offering the 'basic economy' fares and inclusions seen in the US. That would compete with the JQs while ameliorating the costs associated with a stand-alone Tiger brand.

09 Aug 2015

Total posts 90

Bring it on. REX must have a lot of passengers who don't just fly from a regional centre to a capital city but would do so to board an interstate flight, so it may as well keep those passengers instead of handing them over to Qantas or Virgin or even Jetstar. It doesn't need anywhere near the frequency of QF, VA or JQ because it would probably be tied more to its regional connections. And I think 'Euro business class' would be fine if the fares reflect this, it would just be more of an upsell to economy passengers than stealing business travellers away from QF or VA, but if the schedule and product worked for me then I could see a few SYD-MEL REX flights suiting my clients' budgets. REX just needs to really do its numbers very carefully on all this, but they've been around for years and have some smart people and I reckon this could really get off the ground.

so 10 aircraft can give you a lot of frequency when not flying to any regional centres.

For example, roughly 4 aircraft at SYD & 3 each at BNE, MEL (PER & ADL to be added later)

So at 6am & 6.05am 2 aircraft each depart SYD for MEL & BNE.

At 6am, 1 aircraft departs BNE for SYD & another for MEL & from MEL to BNE & SYD.

At 7am 1 aircraft depart BNE for SYD & another from MEL to SYD.

At 8am aircraft that left SYD at 6 & 6.05am could have turned around at BNE & MEL & be flying back to SYD.

Rex may even be able to do faster turns.

Very rough, but this took 5 mins. Am sure a better plan could be arrived at, with a bit more thought.

This would cover most business types.

Another aircraft or 3 or 4 fast, would make schedule on east coast even better.

For PER, some back of clock initially to & from east coast, which PER pax are used to anyway.

ADL ? Where is ADL again ?


11 Jul 2014

Total posts 893

Hasn't the government given REX more cash to run there business and isn't REX owned by overseas interests. Amazing job done by the Nationals leader.

03 Jan 2013

Total posts 52

Regional airlines and the communities they serve have been provided with subsidies of around $300m - $200m in direct subsidies to communities and $100m to underwrite the running of the regional airlines on regional routes, and we're talking about 12 regional airlines not just Rex (and excluding Q and V) that employ 26,000 people. It's not a cash handout. All grant money comes with conditions.

23 Oct 2014

Total posts 232

Rex received a cash handout from the Federal government. They cannot one week say they are about to go broke, then the next month “we a expanding to get jets and become the third national carrier”.

Post COVID should be a government inquiry into how all the subsidised money was spent.

24 Sep 2019

Total posts 13

Couldn't agree more.

yes they can, they just did. Great play by Rex, but you must realise the handout was for existing Rex to keep flights going into some one horse towns, that might only get 1 flight a day or less at best.

that's mccormacks job, to keep the regions connected.


Jetstar Airways - Qantas Frequent Flyer

14 Jan 2017

Total posts 65

Always found Rex to be expensive but they are certainly challenging the notion that Virgin has to survive so we have some competition against Qantas. For those who insisted it would take years for a new entrant to come into the market, think again. If Rex really does want to start operating on the trunk roots it might have to revamp its website. Has to be one of the worse airline websites ever.

you are never going to get many cheap fares on 34 seaters.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 452

there's a lot of say late model md88's or md90's out there they could use or even the embraer 190 used they could go for.basically given the wait times for say a new a220 or e175 or a 737 of some type.there are some cities crying out for something anything newer than a bunch of saabs most of which have been around since the era when the saab 9-3 was at one time a saab 900 and the car brand saab existed.

31 Mar 2014

Total posts 372

After Rex had a prop fall off a rickety old Saab, I'm not sure I would get on a rickety old MD88. I know planes can fly indefinitely if maintained properly, a prop falling off is a big concern.

I am sure the public perception of some 30yo planes wouldn't be great as well. The reason airlines can get away with 30yo Fokker's is either no other choice or mining contracts make the choice for them.

No, Rex would be looking at extremely cheap, but not very old B738s, probbaly VA ones, that won't be wanted even if V2 does get off the ground.

Rex looking more & more like V2, but what about regional jet flights like to CNS from BNE, SYD, MEL ?

Who would fly them ?

Would govts have to underwrite these to some small degree ?

Would Jetstar put aircraft that would have otherwise been flying internationally (for rest of 2020 only) on these sorts of routes ?

Presume a lot of leisure travellers for Sunshine or Gold Coast would simply fly into BNE.

(BNE to Surfers Paradise is only 25 mins drive further than OOL)

Imagine OOL, MCY, CNS, TSV, PPP airports woujld be harrassing Rex to lease more aircraft fast so as to fly to these places. Deals on airport charges ?

many people out there don't like Qantas at all. Many think they are too arrogant.

I know many who collect frequent flyer points, both Qantas & Virgin, but would never ever pay to fly with Qantas. They get all their points from credit cards.

15 Sep 2012

Total posts 96

There are a couple of things to think about here:

1) Rex already operates out of each of these capital cities to regional ports. They therefore already have staff and facilities in place.

2) REX still holds approval to operate jets dating back to when Kendell operated CRJs

3) REX can probably buy the Tigerair fleet and their slots from Virgin administrators for a bargain price right now.

4) Plenty of aircraft around world available for lease or purchase at bargain prices. Could possibly get some widebodies for trans continental service.

5) Could also look at routes to NZ, particularly if border rules are relaxed.

6) Existing regional services feeding these new services gives them a big advantage previous operators like Compass lacked.

7) Australians will be looking to travel next year after Coronavirus restrictions are lifted. We will be limited to domestic travel

Rex jets qon't be getting any widebodies.

Latest news is to start flying March with final decision by board in 8 weeks (by which time they will know what's happening with VA)

One thing not mentioned, is travel agents, who book something north of 65% of business trip in Australia. Many hate Qantas & can easily be bribed to push clients onto Rex.

Virgin Australia - Velocity Rewards

10 Jan 2012

Total posts 261

The only way they might make this work is if they just use the jets to connect to their regional network or fly the jets to regional airports that can accept jets like TMW, WGA, BNK, BDB, WTB.

23 Oct 2014

Total posts 232

One Airline has modern brand new Jets, A330's with world best business class suites on transcon, fantastic lounges in about 12 city's with baristas and wine bars, a great loyalty program with any seat rewards and low points burn, good earn rates and minimal “surcharges” on award bookings to the states, priority boarding, 777's to LA with an inflight bar - the best way to travel to the states & the best awarded cabin crew in the world.

The other has 20-35 year old turbo probs and serves tea with dry biscuits.

Based in this known track record as a traveller I know what airline I'd prefer to be the second carrier in Australia.

Investors will look at the “opportunity” currently provided, and I believe the Virgin group - with debt and cost base reduced is a fantastic business and airline and one many investor will prioritise purchasing and re launching. Because it's all already set up, CASA approved and all the infrastructure is in place, with the administration finishing in mid - late June the owners would take over early July 2020, all indications are domestic and NZ travel without restriction starts July 2020, perfect timing, March 2021 - is way way to last for the public.

doubt if v2 gets up it will do any international. The very expensive a330s are gone.

Rex could do only BNE, SYD, MEL & do well if cheaper than Qantas. Rex has small lounges, which could be expanded in matter of days.

They could also have a ff program. Qantas ff program is not that special.

You have to pay $400 on top of roughly 100,000 ff pts to get return ticket to LAX, which is not upgradable in most cases.

For $400 more, you can buy a return ticket to LAX which is upgradable.

What do Saabs have to do with anything except provide feed to rex jets ?

March was just bandied around. Who knows what will happen if v2 doesn't get a start.

Virgin Australia - Velocity Rewards

10 Jan 2012

Total posts 261

They'll go to LAX, HND, probably DPS, NAN, AKL, WLG, CHC, DUD and AKL-RAR.

24 Sep 2019

Total posts 13

Agree with the other destinations but AKL-RAR is very unlikely to feature in any future offering. Dunedin also dicey but Queenstown could be up and running by August if all goes well. It all hinges on the NZ-AUS bubble allowing non-essential travel with no 14 day quarantine requirement. Otherwise who would ever holiday in NZ if they had to quarantine on arrival in NZ and then again on arrival in Australia?

Virgin Australia - Velocity Rewards

10 Jan 2012

Total posts 261

I forgot about ZQN, DUD has no other competition from Australia. AKL-RAR, only NZ on the route.

But re: REX, if Tiger don't come back some routes will then have four carriers. If they do, five. But REX would be in the same league as JQ and TT.

there used to be BNE, SYD & MEL/DUD now only BNE/DUD because it's a very thin route only 3-4 times a week. Rex will be above JQ but with lower costs & give QF a good run for $$$ on golden triangle. Remember the recession.

crazy part about ZQN is, in school holidays it's more expensive to fly to than LAX, which is insane seeing BNE/ZQN is 3 hours flying time & BNE/LAX is 12 hours.

ZQN could have next month, but aircraft do get stuck at ZQN sometimes when ZQN closes sometimes for many hours or days, due to weather.

Quarantine ? That has to end very soon.

23 Oct 2014

Total posts 232

You cannot change a company's entrenched culture, how they have operate and “prioritised” in the past (old aircraft, low capital cost, regional flying, subsidised routes) will flow through to the proposed new operation is how it is conducted. You cannot change a personality.

yeah Qantas culture is awful. Still like it was all public servants & a cost plus airline.

Rex jets might end up being VA aircraft with carefully selected VA crews & other staff, who would rather have a job at lower pay than be on dole. Many VA staff won't qualify or be asked to apply.

16 Nov 2018

Total posts 30

VA is already miserable here, why would REX set itself in the same business model/market? VA couldn't compete with QF for premium travellers, yet still operated at high costs than LCC.

Who says Rex would operate at anything like top heavy VA ?

Rex can do very nicely on golden triangle, for those who fly at or near full economy fares & lots of those people. Not exactly sure what full economy fare is SYD/MEL but must be around $499 one way. So all Rex has to do is come in at less than Qantas fare, say $699 return & they can make really good money. JQ is leisure only & has very few flights SYD/MEL in peak hour.

Everyone is tightening their belts & that includes corporates, who in many cases, will make sure their people are flying cheapest fare of the day, which is almost never going to be qantas. Do you really think a company travel manager is going to let staff fly Qantas at that sort of fare differential ?

08 May 2020

Total posts 83

Not sure if REX has the Backbone or the experience dealing against the Big Boys. There had been attempts after the the Ansett departure and the only one which come thru was one who was backed by much more money called Virgin Blue. all others lasted a few months to a year or so. Rex airline in the last couple of years had been in the news for not all the good reasons as some of their maintenance had been in question. Anyway good luck to them if they can make it and find the right financial backers.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 452

it won't work.even canada and they have a population similar to ours tried at one time with wardair,canadian airlines and air canada and look what happened.they all gradually merged into one and in place for the budget airlines they have westjet now.the only part of the world more than two airlines works is america or china.they have the populations for it.

Rex have feed which had been going to Virgin & Qantas & will stay in house if they fly between capital cities.

They exist now & all they are wanting to do is bring in a new type. Don't know why they would bother with anything apart from golden triangle, at least to start with. Get their frequency up to close to qantarse & they'll kill qantarse on price.

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