Rex set to swoop on Virgin Australia's unwanted Boeing 737s?

The regional airline is said to be closing a deal to pick up as many as ten of Virgin's ex-lease Boeing 737 jets.

By David Flynn , August 14 2020
Rex set to swoop on Virgin Australia's unwanted Boeing 737s?

Regional airline Rex could use some of Virgin's unwanted Boeing 737s to kick-start the regional airline's own flights between Brisbane, Sydney and Melbourne.

The airline's ambitious play to spread its wings beyond regional routes and challenge Qantas and Virgin on the competitive 'triangle' market is set to launch in March 2021, but would rely on up to ten jets the calibre of the Airbus A320 or Boeing 737 compared to Rex's current all-turboprop fleet.

And the Sydney-based airline may not have to look very far to find those jets, with Virgin set to shed many of its leased Boeing 737s as it moves towards a slimmed-down model under the ownership of Bain Capital.

Read more: Bain's 'rescue and reboot' plan for Virgin Australia revealed

Virgin's pre-pandemic Boeing 737 fleet numbered 85 (including the jets assigned to its now-axed budget arm Tigerair), but it's understood that only around 40 of those are owned by the airline, leaving as many again of the workhorse single-aisle jets under lease – and they won't all be needed for the downsized Virgin Australia 2.0.

"How many we are taking through and how many we will need in the future is still a work in progress," Virgin Australia CEO Paul Scurrah remarked during a media briefing earlier this month.

"At the end of this pandemic, once we get back to pre-Covid FY19 levels, we see a market that could sustain us having 60-80 Boeing 737s in our fleet," Scurrah added, implying that the short-term 'reboot' fleet will be substantially lower.

From Virgin to Rex?

Several leasing firms – who are among the creditors for Virgin's outstanding $6.8 billion in debt when the airline collapsed into administration on April 21 – have reportedly been notified by Virgin that their Boeing 737s will no longer be needed.

According to The Financial Review, Rex is now in discussions with those companies about having as many as ten Boeing 737s transferred from Virgin's Brisbane hangars to its own.

The airline had previously said it would need "an initial fleet of five to ten narrow-body jet aircraft to be based out of Sydney and/or Melbourne to service the golden triangle (Sydney-Melbourne-Brisbane)."

In a prepared statement, a spokeswoman for Rex said "Rex has not confirmed its choice of aircraft to be used and is in active discussions with lessors from all over the world."

Taking over a slew of former Virgin Boeing 737s may not mean that Rex would keep the same business class cabin as the jets currently sport, however.

In announcing its plans earlier this year, Rex deputy chairman John Sharp indicated it its capital city flights would adopt a 'hybrid' model blending the Qantas and Jetstar offerings but with a lower cost base, saying "this will be halfway between a full-service airline and a low-cost airline."

That could translate into business class being replaced by a 'premium' cabin where the middle seat in a 3-3 layout remains free, along with a little extra legroom or recline compared to other economy seats. Rex and the aircraft leasing firm would need to agree on how the cabins would be refitted with new seating.

The airline says its capital city flights "will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating."

David

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.

26 May 2016

Total posts 14

random question?. This article quotes 'taking over a slew of former Virgin Boeing 737's may not mean that REX would keep the same business class cabin as the jets currently sport'.

Who owns the seats of planes that are leased and more importantly what happens to 'The Business' seats of the leased a330's and single 777?.

As I understand it the seats are owned by Virgin as part of their intellectual property and brand identity package. It'd be interesting if Rex could just take the Boeing 737, get rid of any obvious 'Virgin Australia' logos etc on the seats, give it a new Rex livery and roll it out. But I think the plane will be gutted, the seats all tossed out and new seating installed. As for the A330s and B777s those seats will also be removed and either scrapped or sold on eBay, unless Bain can find other airlines which don't compete with Virgin and has a small A330 or B777 fleet and sell The Business seats to them, but I think this would be so complicated that from a business 'time is money' perspective they would rather just ditch them and move on, keep their focus on VA2.

NZ

13 Aug 2016

Total posts 59

VA's ex E190's kept there VA Seats, and some are still flying out in Europe with VA cabins in the.

QF

11 Jul 2014

Total posts 488

I can't see this being a long term profitable business, I want lounges, I want points to use on other international airlines, I want to use 1 airline domestically with good business options for other airlines internationally and I can't see another player helping the domestic market.

07 Mar 2017

Total posts 39

They're targeting the Jetstar, and regional market though.

While I'm personally not a fan, for a number of reasons, there is a market as the above attest to - both being generally profitable.

Rex would have some good insight into how many of its regional passengers fly onwards to another capital city, and so it would probably be counting on keeping a lot of those passengers on its own flights instead of handing them over to Qantas or Virgin. That plus budget-oriented travellers pinched from Jetstar would be their target market. I can't see anybody choosing Rex for SYD-MEL over Qantas or Virgin unless the Rex pricing is insanely cheap.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

You've hit it on the head, LIT.  10-out-of-10.  If (big 'IF') Rex were to align arrival or regional turbo-prop services into capitals within 45 minutes before departure of inter-State services, they'd make a KILLING.  Most country/regional pax would be happy with 'food court' style F&B facilities and 5-Star/lounge-grade toilet facilities between connecting flights (and spared the "2 Km walk" to QF/VA terminals).  But assumes Rex can secure tight transfers of checked-luggage.  

That said, I can't see a head-to-head challenge to QF/VA on peak services being sustainable long term, no matter how lower the cost base secured by Rex.  In fact, I'd venture to suggest this could become Rex's undoing?  But if they focus on the ease of transfers for, say, a Tamworth Pax needing to get to BNE or MEL (via SYD), they'll dominate big-time (country folk would be very appreciative and extremely loyal to that service provider).  It HAS NOT been happening on QF/VA regional services.  

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 174

What about people and business who just want cheapest fare of day - and there is a market for cheapest but not low cost budget airline. Personally I find a lounge for domestic travel a gimmick and bonus if you get access but not essential. Do people really need a drink and a meal before a 1.5hr flight from Syd to Mel or Bne. Save your money on an air ticket and have a decent meal at restaurant not at the airport before arriving. As with frequent flyer - either sign up to credit card bonus or you need to spend $50k every year on flights to get some sort of decent use out of your points.

08 Feb 2018

Total posts 94

thats fine but not everyone places the same value on that. Others want on time, safe, and a drink when asked for on a short flight. I also understand its quite a hassle if you live eg in regional NSW and need to get to Melb, Rex and connect to another carrier in Syd. If you could go Rex all the way then that's surely a plus. 

I'd fly Rex Syd to Mel if they were price competitive for sure.

20 Oct 2015

Total posts 69

Very smart move by Rex, in today's market they will probably be able to negotiate a very good price from the leasing companies. Rex might even pick up a team of ex-VA crew who are all B737-rated.

Virgin Australia - Velocity Rewards

08 May 2014

Total posts 44

Agree with Gold4Life - There should also be a slew of 737 rated flight crew (and hopefully still current rated) available that REX should be able to recruit at short notice

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 241

Funding seems pretty weak tbh. 

Unless if REX are able to take onboard cashed up investors that know what they're doing (and I'm not talking incompetent entities such as Etihad and Singapore Airlines who both have a long history of fronting bankrupt identities and losing money on other investments), IMO I can't see this lasting long.

danv

IMO

This is a very good plan & don't need huge volumes of cash.

Rex already exist at BNE, SYD, MEL & have feed from their own regional services.

Costs claimed to be 30% lower than Virgin IIRC or was it Jetstar.

10 x B737-800s will give them very good frequency if only do 1 or 2 routes initially.

Massive price advantage over Qantas/Virgin 2 in a recession !!!!!!

They can also offer through fares from a regional airport to eg. MEL via SYD.

Qantas - Qantas Frequent Flyer

23 Apr 2019

Total posts 1

Rex about to take on 10 Aircraft they afford. 

Joe
Joe

03 May 2013

Total posts 516

IP? They'll just reupholster seats, different colour scheme and change some panels. Why would you remove 2-2 in J only to replace with a criminal euro J model with middle seat blocked out? Isn't the whole aim to compete?

09 Aug 2015

Total posts 43

If Rex can keep Virgin's 2-2 business class seats and if it's part of their model then that would be good but I think they are more likely to put the same seats all way through, 3-3 front to back, and block off the middle seats as needed.

Joe
Joe

03 May 2013

Total posts 516

"as needed"? are Rex also expecting to get Hajj contracts with the 737?.  I guess to Rex a 737 is akin to an A380 when your fleet  solely consists of pencils with wings.

Qantas - Qantas Frequent Flyer

31 Mar 2016

Total posts 9

This might be Game On for QANTAS on some of Rex's profitable regional routes now, especially if domestic regional travel is going to dominate for a while in Australia. Griffith, Grafton, Lismore, Broken Hill, Merimubula, Cooma, Mount Gambia, Albany, Esperance ...

Would be rather hypocritical of REX doing their usual whinging press release everytime they get competition - works both ways you know... 

hardly. Qantas have major problems reducing costs with unions breathing down their necks.

07 Nov 2018

Total posts 4

I still wonder if this is a good time for a third mainline airline to start up in Australia. 

08 Feb 2018

Total posts 94

whoa mainline is a pretty old term. And there's already 3. And they're not new. Also tiger was a 4th

UA

09 Mar 2016

Total posts 52

REX will need a USP or two to compete. Better soft product than Jetstar might be one of them. I reckon they could get a good deal of new A220s right about now, too, and what a relief it would be to not have to fly on any B73 again, old fashioned, over-renovated, uncomfortable rubbish. I guess REX and Bain, etc, must be betting that air travel will return to its pre-COVID levels. Unlikely.

09 Aug 2015

Total posts 43

You must be joking, Rex can get the lease on these B737s for a great rate and then offer super competitive fares, why on earth would they spend a fortune on new Airbus A220s so that means a higher cost case and higher fares, and there goes the whole business model. Nobody cares that much about if it's a B737 vs an A220 except for a few aviation nuts who probably don't have a lot of experience in running a business let alone an airline.

UA

09 Mar 2016

Total posts 52

In fact, there are a lot of data showing that people do choose an airline based on types of aircraft, if the airline capitalizes on the possibilities. Do you seriously think that if travel time was factored out, people wouldn’t care if they flew MEL-SYD on a Q40 or B73? The popularity of the A380 with pax is current evidence of that but it’s always been the case, IF airlines market it.  People care about what good marketing persuades them to care about. 

Qantas

19 Apr 2012

Total posts 950

Sparksy it is really the seat count and running costs for being a hub plane for their Saab’s. The 737 is a bit big. The A220 is the right size but too new to lease or buy, so the other option is B717s but qantas grabs them as soon as they’re available 

09 Aug 2015

Total posts 43

"REX will need a USP or two to compete. Better soft product than Jetstar might be one of them." Soft product will be really important to Rex and also to Virgin 2.0, in the end airlines are just flying people around in a metal tube, the seats in the domestic B737 market are pretty much the same so airlines will need to compete on price and soft product and the whole  value "experience".

23 Jul 2017

Total posts 62

Rex taking on Qantas reminds me of Compass parts I and II back in the 1990s. It would be a shame if Rex fell in a heap leaving regional areas without air routes because of trying to take on the "big boys". Walk before you run then fly, Rex (pun intended). Australia doesn't need another airline collapse.

Do you think that they might fly to Avalon (Melbourne)?

Some flights to/from there are always, always packed out.

Qantas

19 Apr 2012

Total posts 950

If they did that then their regional saabs would have go there as well. Country folk won’t like the trek from near Geelong to Melbourne for their work international flight or whatever.

Qantas - Qantas Frequent Flyer

05 Jun 2014

Total posts 174

Agreed, for flights over such short distances airports closest to the final destination are essential. If the ABX-MEL route was made ABX-AVV I'd tip many pax to switch to just driving themselves down. 

08 Jul 2020

Total posts 6

This is a smart and will be profitable move. Pre covid Sydney - Melbourne was 2nd busiest route in the world. And Rex clearly going to start with that route as that's where they want to base the aircraft. As for joining the market in March, it is good timing. As passenger numbers slowly pick up so will available flights and if Rex is already there, they wont have to deal with Qantas and Virgin having already flooded the market.

As for the seating, if they manage to get any of the newer planes, they just need to take the Virgin logo off the seats and they would look smart enough. As for the front of the plane if they take out the business seats and put in standard seating with extra leg room, then they would actually be better than European business class on airlines like BA. Once they get used to it,  short haul business flyers really just dont want to be sitting ontop another person. In seat power if possible would probably be enough to get people moving across to this economy plus style seating.

If their service is like their regional arm, then I look forward to it, as all the flight I have taken with them have been good.

22 Nov 2019

Total posts 3

Have flown Rex from our country town to Sydney on quite a few occasions.  You’d never know if your flight was going to be cancelled or not.  One night before a 6.30 am flight I found out at about 10 pm the night before that our flight had cancelled, with the advice to rebook a flight from a nearby town some 60 km away.   Lucky I checked my phone, but it was one cancellation too many.  Now we drive to Sydney the afternoon before, stay at the Stamford, who keep our car whilst we return.   Less stress, more enjoyable and cheaper.   Rex is too unreliable for me.   I would never fly with them on a main route out of principle.

every airline has aircraft go unservicable. If at end off the line, there is no backup whatsoever. Same with Qantas.

08 May 2020

Total posts 51

I can see issues like how frequency of arrivals of REX Jets from Interstate arrive to match departure times to Regional destinations. I believe the only way I would probably book a interstate flight with REX is,  in combination e/g Melbourne - Adelaide  and then Regional flight to Port lincoln.  so unless interstate flights matching within 1 - 1, 1/2 hours what is the benefit?? so may as well fly Virgin or Qantas to the Hub and then fly with the Regional.

Qantas - Qantas Frequent Flyer

26 Nov 2012

Total posts 47

Good luck to them. I’ll probably fly them once like I did Compass 1 and 2, Ozjet, Tiger, Impulse and Virgin Blue but then I’d be back to QF (unless their J fare is the same as a Red e-deal) because those Flounges and partner lounges around the world are such an incentive for me. Those that don’t think lounges matter obviously don’t venture far and wide because arriving into DOH HKG SIN LHR LAX etc or transferring domestically with hours to spare means lounge access matters a lot.

On a side note, I do clearly remember before Virgin Blue started Brett Godfrey said they’d be flying 737s into every city in Australia with a population of 50k or more. Of course that never happened (Ballarat, Bendigo, Albury, Mildura, Tamworth spring to mind).  But maybe Rex can add a few of those to their offering.  That’d be fun and could really mix things up if their cost base was low enough. 

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

Virgin had a jet service (not the Fockers) do MEL-Mildura on a daily basis for last 5-6+ years.  Bendigo and Ballarat too close to MEL. 

As for Tamworth/Armadale .....

Heard about a group of pilots, who are looking to charter aircraft to fly internationally on former Virgin routes on ULCC basis, next year, only in high season initially, where there is greatly reduced competition. Not employees, so they don't get paid unless profitable.

So you could sit in business class, but get no or basic food/drinks & might have to pay for rest.

Don’t think they have defined when next year.

Not sure if planning on using Rex jets or maybe Virgin.

Obviously wouldn’t be peak hour Mon to Fri but plenty of time/aircraft all day Saturdays & Sundays before probably 3pm, as well as perhaps, between am & pm peak hours Mon to Fri for short haul international..

Fiji Airways before corona fly daily 737 from Bris to Fiji, but 2 of those were red eyes leaving Bris just before midnight. These flights allowed people wanting to fly to outer islands to connect same day, without need to overnight at Nadi or Suva. Not ideal if just wanting to go to main island. IIRC Jetstar flew Syd to Fiji departing around 10.30pm & so arriving at some very early hour like 4am local. Guess they have jets otherwise parked at Syd overnight.

31 Jan 2013

Total posts 39

VA had some very expensive leases so Rex would need to do some hard negotiating.  But Rex has a history of older aircraft so wouldn't be surprised to see something like a few ex-Delta MD80's come out of the Mojave desert. 

UA

09 Mar 2016

Total posts 52

All of Delta's retired MD80, 88, and 90 aircraft are at BYH in northern Arkansas, I believe. They are all very old, very tired, expensive to keep in the air, gas guzzlers, and big polluters. The $$$ and logistics of keeping an aged jet airliner in the air are rather different to the $$$ and logistics of keeping aged turboprops flying, and as everybody knows, REX is already having issues keeping its Saabs in CASA operating condition. Be very foolish to opt for equipment at the end of its useful life. At least the Virgin 73s have some time left in them.

Qantas

19 Apr 2012

Total posts 950

Mikana the B717 derivative would work but not many of them and Qantas tends to snap them up.


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